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A model of FDI spillover in a natural resource rich LDC

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  • Issabayev, Murat
  • Pelzman, Joseph

Abstract

•In our model the host government (HG) and international oil company (IOC) negotiate on how to share the resource profit.•In addition, HG requires from IOC spillover contribution to domestic economy by promoting local contents (LC).•We claim that the government-led LC policy does not generate spillover benefit to everyone in the host country.•Our paper theoretically shows that LC policy is good for domestic suppliers in petroleum value chain and bad for the HG.•We theoretically show that the net negative spillover effects are possible due to low absorptive capacity and side payment.•To benefit from natural resource FDI spillover when world oil price increases, the HG should grant a greater share to IOC.

Suggested Citation

  • Issabayev, Murat & Pelzman, Joseph, 2019. "A model of FDI spillover in a natural resource rich LDC," Resources Policy, Elsevier, vol. 64(C).
    • Handle: RePEc:eee:jrpoli:v:64:y:2019:i:c:s0301420719302405
    DOI: 10.1016/j.resourpol.2019.101479
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