Investment and Expropriation under Oligarchy and Democracy in a Heckscher-Ohlin World
We study the incentives to expropriate foreign capital under democracy and obligarchy. We model a two-sector small open economy where foreign investment triggers Stolper-Samuelson effects through reducing exporting costs. We show how incentives to expropriate depend on the distributional effects of the investment and how these affect the interests of the group in power. How investment affects the incomes of the different groups in society depends on the sectors where these investments are undertaken and the structural features of the economy such as factor intensity. We characterize expropriation equilibria and show that if investment is undertaken in the sector that uses labor less intensively, democracies are generally more prone to expropriate. This result provides one possible rationalization for the wave of expropriation equilibria and show that if investment is undertaken in the sector that uses labor less intensively, democracies are generally more prone to expropriate. This result provides one possible rationalization for the wave of expropriations in Latin America under governments with a broad popular base during the 20th Century.
|Date of creation:||Jan 2008|
|Date of revision:|
|Contact details of provider:|| Postal: Edgbaston, Birmingham, B15 2TT|
Web page: http://www.economics.bham.ac.uk
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Daron Acemoglu & Simon Johnson & James Robinson, 2004.
"Institutions As The Fundamental Cause Of Long-Run Growth,"
002889, UNIVERSIDAD DE LOS ANDES-CEDE.
- Acemoglu, Daron & Johnson, Simon & Robinson, James A, 2004. "Institutions as the Fundamental Cause of Long-Run Growth," CEPR Discussion Papers 4458, C.E.P.R. Discussion Papers.
- Daron Acemoglu & Simon Johnson & James Robinson, 2004. "Institutions as the Fundamental Cause of Long-Run Growth," NBER Working Papers 10481, National Bureau of Economic Research, Inc.
- Bruce A. Blonigen & Matthew J. Slaughter, 2001.
"Foreign-Affiliate Activity And U.S. Skill Upgrading,"
The Review of Economics and Statistics,
MIT Press, vol. 83(2), pages 362-376, May.
- Bruce A. Blonigen & Matthew J. Slaughter, 1999. "Foreign-Affiliate Activity and U.S. Skill Upgrading," NBER Working Papers 7040, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:bir:birmec:08-02. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Colin Rowat)
If references are entirely missing, you can add them using this form.