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Alternatives to local content

Listed author(s):
  • Ivar Kolstad
  • Abel Kinyondo

This paper suggests that an optimal local content policy in the context of flawed institutions is a more minimal one than those typically pursued by developing countries with recently discovered petroleum reserves. We argue that local content requirements need to be seen as a public expenditure question: such requirements increase multinationals’ costs and hence reduce the taxes that can be extracted from these companies. There are thus opportunity costs in imposing local content requirements, since the forgone taxes could be used in other ways to improve development prospects. Such requirements can also exacerbate key problems of patronage and rent-seeking.

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File URL: https://www.wider.unu.edu/sites/default/files/wp2015-106.pdf
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Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series WIDER Working Paper Series with number 106.

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Length: 21
Date of creation: 2015
Handle: RePEc:unu:wpaper:wp2015-106
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  1. Xavier Sala-i-Martin & Arvind Subramanian, 2013. "Addressing the Natural Resource Curse: An Illustration from Nigeria," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 22(4), pages 570-615, August.
  2. Kolstad, Ivar & Wiig, Arne, 2009. "It's the rents, stupid! The political economy of the resource curse," Energy Policy, Elsevier, vol. 37(12), pages 5317-5325, December.
  3. Jeffrey D. Sachs & Andrew M. Warner, 1995. "Natural Resource Abundance and Economic Growth," NBER Working Papers 5398, National Bureau of Economic Research, Inc.
  4. Matsen, Egil & Torvik, Ragnar, 2005. "Optimal Dutch disease," Journal of Development Economics, Elsevier, vol. 78(2), pages 494-515, December.
  5. Silje Aslaksen, 2010. "Oil and democracy: More than a cross-country correlation?," Journal of Peace Research, Peace Research Institute Oslo, vol. 47(4), pages 421-431, July.
  6. Kevin K. Tsui, 2011. "More Oil, Less Democracy: Evidence from Worldwide Crude Oil Discoveries," Economic Journal, Royal Economic Society, vol. 121(551), pages 89-115, March.
  7. Robinson, James A. & Torvik, Ragnar, 2005. "White elephants," Journal of Public Economics, Elsevier, vol. 89(2-3), pages 197-210, February.
  8. Qiu, Larry D. & Tao, Zhigang, 2001. "Export, foreign direct investment, and local content requirement," Journal of Development Economics, Elsevier, vol. 66(1), pages 101-125, October.
  9. Wiig, Arne & Kolstad, Ivar, 2010. "Multinational corporations and host country institutions: A case study of CSR activities in Angola," International Business Review, Elsevier, vol. 19(2), pages 178-190, April.
  10. van Wijnbergen, Sweder J G, 1984. "The 'Dutch Disease': A Disease after All?," Economic Journal, Royal Economic Society, vol. 94(373), pages 41-55, March.
  11. Lahiri, Sajal & Ono, Yoshiyasu, 1998. "Foreign Direct Investment, Local Content Requirement, and Profit Taxation," Economic Journal, Royal Economic Society, vol. 108(447), pages 444-457, March.
  12. Ivar Kolstad & Arne Wiig, 2014. "Diversification and democracy," CMI Working Papers 9, CMI (Chr. Michelsen Institute), Bergen, Norway.
  13. Sajal Lahiri & Yoshiyasu Ono, 2003. "Export-Oriented Foreign Direct Investment and Local Content Requirement," Pacific Economic Review, Wiley Blackwell, vol. 8(1), pages 1-14, 01.
  14. Michael Alexeev & Robert Conrad, 2009. "The Elusive Curse of Oil," The Review of Economics and Statistics, MIT Press, vol. 91(3), pages 586-598, August.
  15. Andersen, Jørgen Juel & Aslaksen, Silje, 2013. "Oil and political survival," Journal of Development Economics, Elsevier, vol. 100(1), pages 89-106.
  16. Gene M. Grossman, 1981. "The Theory of Domestic Content Protection and Content Preference," The Quarterly Journal of Economics, Oxford University Press, vol. 96(4), pages 583-603.
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