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Expropriation of foreign direct investments: sectoral patterns from 1993 to 2006

  • Christopher Hajzler

    ()

This paper documents expropriation of foreign direct investment (FDI) across all developing coun- tries for the 1993-2006 period, extending work by Kobrin (1980, 1984) and Minor (1994). This unique data set on worldwide expropriation between 1960 and 2006 is used to highlight several (interrelated) stylized facts. First, although expropriations have become less frequent compared to the 1970s, the number of takings has risen since the mid-1990s. Second, foreign firms are more vulnerable to expro- priation in resource-based sectors, particularly in mining and petroleum. Third, the timing of expro- priation coincides with fluctuations in mineral output price levels. Finally, when newly constructed FDI stock estimates are used to compare the sectoral distribution of FDI of recent expropriating coun- tries to that of non-expropriating countries, we find that expropriating countries have a higher average share of aggregate FDI located in resources; however, this difference is not reflected in average sector production shares. This last fact is puzzling given that natural resource-based FDI has traditionally been considered high risk.

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File URL: http://hdl.handle.net/10.1007/s10290-011-0103-0
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Article provided by Springer in its journal Review of World Economics.

Volume (Year): 148 (2012)
Issue (Month): 1 (April)
Pages: 119-149

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Handle: RePEc:spr:weltar:v:148:y:2012:i:1:p:119-149
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  1. Randall J Jones, 1984. "Empirical Models of Political Risks in U.S. Oil Production Operations in Venezuela," Journal of International Business Studies, Palgrave Macmillan, vol. 15(1), pages 81-95, March.
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  3. Nellor, David C L, 1987. "Sovereignty and Natural Resource Taxation in Developing Countries," Economic Development and Cultural Change, University of Chicago Press, vol. 35(2), pages 367-92, January.
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  11. Harald Knudsen, 1974. "Explaining the National Propensity to Expropriate: An Ecological Approach," Journal of International Business Studies, Palgrave Macmillan, vol. 5(1), pages 51-71, March.
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  14. Picht, Hartmut & Stuven, Volker, 1991. " Expropriation of Foreign Direct Investments: Empirical Evidence and Implications for the Debt Crisis," Public Choice, Springer, vol. 69(1), pages 19-38, February.
  15. Raff, H, 1991. "A Model of Expropriation with Asymetric Information," Cahiers de recherche 9105, Université Laval - Département d'économique.
  16. Michael S Minor, 1994. "The Demise of Expropriation as an Instrument of LDC Policy 1980-1992," Journal of International Business Studies, Palgrave Macmillan, vol. 25(1), pages 177-188, March.
  17. James Otto & Craig Andrews & Fred Cawood & Michael Doggett & Pietro Guj & Frank Stermole & John Stermole & John Tilton, 2006. "Mining Royalties : A Global Study of Their Impact on Investors, Government, and Civil Society," World Bank Publications, The World Bank, number 7105.
  18. Roderick Duncan, 2006. "Price or politics? An investigation of the causes of expropriation ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(1), pages 85-101, 03.
  19. Michael Tomz & Mark L. J. Wright, 2008. "Sovereign Theft: Theory And Evidence About Sovereign Default And Expropriation," CAMA Working Papers 2008-07, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
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