The effects of international politics on oil-exporting developing countries
AbstractInternational politics affects oil trade. But does it affect the oil-exporting developing countries more? We construct a firm-level dataset for all U.S. oil-importing companies over 1986-2008 to examine how these firms respond to changes in "political distance" between the U.S. and her trading partners, measured by divergence in their UN General Assembly voting patterns. Consistent with previous macro evidence, we first show that individual firms diversify their oil imports politically, even after controlling for unobserved firm heterogeneity. We conjecture that the political pattern of oil imports from these individual firms is driven by hold-up risks, because oil trade is often associated with backward vertical FDI. To the extent that developing countries have higher hold-up risks because of their weaker institutions, the political effect on oil trade should be more significant in the developing world. We find that oil import decisions are indeed more elastic when firms import from developing countries, although the reverse is true in the short run. Our results suggest that international politics can affect oil revenue and hence long-term development in the developing world.
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Bibliographic InfoPaper provided by Institute of Developing Economies, Japan External Trade Organization(JETRO) in its series IDE Discussion Papers with number 459.
Date of creation: Mar 2014
Date of revision:
Publication status: Published in IDE Discussion Paper. No. 459. 2014.3
Postal: Publication Office, IDE 3-2-2 Wakaba, Mihama-ku, Chiba-shi, Chiba 261-8545 JAPAN
Find related papers by JEL classification:
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
- F59 - International Economics - - International Relations, National Security, and International Political Economy - - - Other
- Q34 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Natural Resources and Domestic and International Conflicts
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-07-13 (All new papers)
- NEP-BEC-2014-07-13 (Business Economics)
- NEP-ENE-2014-07-13 (Energy Economics)
- NEP-INT-2014-07-13 (International Trade)
- NEP-POL-2014-07-13 (Positive Political Economics)
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