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The Geoeconomics of Contract Enforcement

Author

Listed:
  • Gerhard Toews
  • Elena Paltseva
  • Marta Troya-Martínez

Abstract

Historically, contract enforcement between multinationals and host governments relied on military power. In the late 1960s, Western Great Powers (WGP) – U.S., U.K., France – sharply reduced military interventions, increasing expropriation risk in weak-institution countries. We study the effect of this unanticipated global shift using microdata from the petroleum industry. Firms headquartered in WGP responded by delaying ("backloading") production by 2-4 years, converging to the delays already exhibited by other multinationals. Backloading resulted in annual revenue losses of one quarter billion US$ per country, largely offset by higher government rent-shares. These patterns are consistent with the formation of self-enforcing agreements.

Suggested Citation

  • Gerhard Toews & Elena Paltseva & Marta Troya-Martínez, 2026. "The Geoeconomics of Contract Enforcement," Working Papers 1569, Barcelona School of Economics.
    • Handle: RePEc:bge:wpaper:1569
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    Keywords

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    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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