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Determinants of Nationalization in the Oil Sector: A Theory and Evidence from Panel Data

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  • Sergei Guriev
  • Anton Kolotilin
  • Konstantin Sonin

Abstract

In this article, we study nationalizations in the oil industry around the world during 1960--2006. We show, both theoretically and empirically, that governments are more likely to nationalize when oil prices are high and when political institutions are weak. We consider a simple dynamic model of the interaction between a government and a foreign-owned oil company. Even though nationalization is inefficient, it does occur in equilibrium when oil prices are high. The model's predictions are consistent with the analysis of panel data on nationalizations in the oil industry around the world since 1960. Nationalization is more likely to happen when oil prices are high and the quality of institutions is low, even controlling for country fixed effects. The Author 2009. Published by Oxford University Press on behalf of Yale University. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org, Oxford University Press.

Suggested Citation

  • Sergei Guriev & Anton Kolotilin & Konstantin Sonin, 2011. "Determinants of Nationalization in the Oil Sector: A Theory and Evidence from Panel Data," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 27(2), pages 301-323.
    • Handle: RePEc:oup:jleorg:v:27:y::i:2:p:301-323
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    File URL: http://hdl.handle.net/10.1093/jleo/ewp011
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    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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