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The effects of international politics on oil-exporting developing countries

Author

Listed:
  • Kashcheeva, Mila
  • Tsui, Kevin K.

Abstract

International politics affects oil trade. But does it affect the oil-exporting developing countries more? We construct a firm-level dataset for all U.S. oil-importing companies over 1986-2008 to examine how these firms respond to changes in "political distance" between the U.S. and her trading partners, measured by divergence in their UN General Assembly voting patterns. Consistent with previous macro evidence, we first show that individual firms diversify their oil imports politically, even after controlling for unobserved firm heterogeneity. We conjecture that the political pattern of oil imports from these individual firms is driven by hold-up risks, because oil trade is often associated with backward vertical FDI. To the extent that developing countries have higher hold-up risks because of their weaker institutions, the political effect on oil trade should be more significant in the developing world. We find that oil import decisions are indeed more elastic when firms import from developing countries, although the reverse is true in the short run. Our results suggest that international politics can affect oil revenue and hence long-term development in the developing world.

Suggested Citation

  • Kashcheeva, Mila & Tsui, Kevin K., 2014. "The effects of international politics on oil-exporting developing countries," IDE Discussion Papers 459, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  • Handle: RePEc:jet:dpaper:dpaper459
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    File URL: https://ir.ide.go.jp/?action=repository_action_common_download&item_id=37716&item_no=1&attribute_id=22&file_no=1
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    References listed on IDEAS

    as
    1. Sergey Mityakov & Heiwai Tang & Kevin K. Tsui, 2013. "International Politics and Import Diversification," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 1091-1121.
    2. Sergei Guriev & Anton Kolotilin & Konstantin Sonin, 2011. "Determinants of Nationalization in the Oil Sector: A Theory and Evidence from Panel Data," Journal of Law, Economics, and Organization, Oxford University Press, vol. 27(2), pages 301-323.
    3. Kashcheeva, Mila & Tsui, Kevin K., 2014. "Why do oil importers diversify their import sources politically? : evidence from U.S. firm-level data," IDE Discussion Papers 458, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    4. Alesina, Alberto & Dollar, David, 2000. "Who Gives Foreign Aid to Whom and Why?," Journal of Economic Growth, Springer, vol. 5(1), pages 33-63, March.
    5. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
    6. Axel Dreher & Jan-Egbert Sturm, 2012. "Do the IMF and the World Bank influence voting in the UN General Assembly?," Public Choice, Springer, vol. 151(1), pages 363-397, April.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Developing countries; United States; International trade; Exports; Petroleum industry; International relations; Foreign investments; Energy resources; International politics; FDI-based imports; Hold-up risk; Energy security;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • F59 - International Economics - - International Relations, National Security, and International Political Economy - - - Other
    • Q34 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Natural Resources and Domestic and International Conflicts

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