IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/6738.html
   My bibliography  Save this paper

Triggers of contract breach : contract design, shocks, or institutions ?

Author

Listed:
  • Nose, Manabu

Abstract

This paper constructs a large contract-level data set to examine factors that trigger breach of foreign investment contracts. Similar to the case of outright expropriation, political regime type is an important determinant of breach of contract. Furthermore, although investors'bargaining power becomes obsolete as contracts mature, contracts can be designed to mitigate the risk of breach of contract by involving multilateral organizations and creating buffers to absorb commodity price shocks. The paper examines the type of countries prone to contract breaches. After controlling for regional and sector fixed effects, less-democratic and resource-dependent governments are more likely to breach contracts, especially after large global shocks, notably natural disasters.

Suggested Citation

  • Nose, Manabu, 2014. "Triggers of contract breach : contract design, shocks, or institutions ?," Policy Research Working Paper Series 6738, The World Bank.
    • Handle: RePEc:wbk:wbrwps:6738
    as

    Download full text from publisher

    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2014/01/06/000158349_20140106093814/Rendered/PDF/WPS6738.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Roland, Gerard & Verdier, Thierry, 2003. "Law enforcement and transition," European Economic Review, Elsevier, vol. 47(4), pages 669-685, August.
    2. Frankel, Jeffrey A., 2012. "The Natural Resource Curse: A Survey of Diagnoses and Some Prescriptions," Scholarly Articles 8694932, Harvard Kennedy School of Government.
    3. Humphreys, Macartan & Bates, Robert, 2005. "Political Institutions and Economic Policies: Lessons from Africa," British Journal of Political Science, Cambridge University Press, vol. 35(3), pages 403-428, July.
    4. Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
    5. Eden, Maya & Kraay, Aart & Qian, Rong, 2012. "Sovereign defaults and expropriations : empirical regularities," Policy Research Working Paper Series 6218, The World Bank.
    6. Edward Miguel & Shanker Satyanath & Ernest Sergenti, 2004. "Economic Shocks and Civil Conflict: An Instrumental Variables Approach," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 725-753, August.
    7. Li, Quan & Resnick, Adam, 2003. "Reversal of Fortunes: Democratic Institutions and Foreign Direct Investment Inflows to Developing Countries," International Organization, Cambridge University Press, vol. 57(1), pages 175-211, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Vadlamannati, Krishna Chaitanya & de Soysa, Indra, 2020. "Oil price volatility and political unrest: Prudence and protest in producer and consumer societies, 1980–2013," Energy Policy, Elsevier, vol. 145(C).
    2. Samuel Brazys & Krishna Chaitanya Vadlamannati & Indra de Soysa, 2019. "Oil Price Volatility and Political Unrest: Prudence and Protest in Producer and Consumer Societies, 1980-2013," Working Papers 201908 Key words: Oil wea, Geary Institute, University College Dublin.
    3. Nathan M. Jensen & Daniel J. Young, 2008. "A Violent Future? Political Risk Insurance Markets and Violence Forecasts," Journal of Conflict Resolution, Peace Science Society (International), vol. 52(4), pages 527-547, August.
    4. Kapeliushnikov, Rostislav & Kuznetsov, Andrei & Demina, Natalia & Kuznetsova, Olga, 2013. "Threats to security of property rights in a transition economy: An empirical perspective," Journal of Comparative Economics, Elsevier, vol. 41(1), pages 245-264.
    5. Robert MacCulloch & Silvia Pezzini, 2010. "The Roles of Freedom, Growth, and Religion in the Taste for Revolution," Journal of Law and Economics, University of Chicago Press, vol. 53(2), pages 329-358, May.
    6. Adugna Lemi & Sisay Asefa, 2009. "Differential Impacts of Economic Volatility and Governance on Manufacturing and Non-Manufacturing Foreign Direct Investments: The Case of US Multinationals in Africa," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 35(3), pages 367-395.
    7. Giuseppe Dari-Mattiacci & Bruno Deffains, 2007. "Uncertainty of Law and the Legal Process," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(4), pages 627-656, December.
    8. Mueller, Hannes & Rauh, Christopher, 2018. "Reading Between the Lines: Prediction of Political Violence Using Newspaper Text," American Political Science Review, Cambridge University Press, vol. 112(2), pages 358-375, May.
    9. Nabil I. Al-Najjar & Luca Anderlini & Leonardo Felli, 2006. "Undescribable Events," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(4), pages 849-868.
    10. Melissa Dell & Benjamin F. Jones & Benjamin A. Olken, 2014. "What Do We Learn from the Weather? The New Climate-Economy Literature," Journal of Economic Literature, American Economic Association, vol. 52(3), pages 740-798, September.
    11. Thiemo Fetzer & Samuel Marden, 2017. "Take What You Can: Property Rights, Contestability and Conflict," Economic Journal, Royal Economic Society, vol. 0(601), pages 757-783, May.
    12. Corno, Lucia & Voena, Alessandra, 2023. "Child marriage as informal insurance: Empirical evidence and policy simulations," Journal of Development Economics, Elsevier, vol. 162(C).
    13. Ciccone, Antonio, 2018. "International Commodity Prices and Civil War Outbreak: New Evidence for Sub-Saharan Africa and Beyond," CEPR Discussion Papers 12625, C.E.P.R. Discussion Papers.
    14. Busse, Matthias & Hefeker, Carsten, 2007. "Political risk, institutions and foreign direct investment," European Journal of Political Economy, Elsevier, vol. 23(2), pages 397-415, June.
    15. Sharon Novak & Scott Stern, 2009. "Complementarity Among Vertical Integration Decisions: Evidence from Automobile Product Development," Management Science, INFORMS, vol. 55(2), pages 311-332, February.
    16. Kien Le & My Nguyen, 2022. "The impacts of rainfall shocks on birth weight in Vietnam," Journal of Development Effectiveness, Taylor & Francis Journals, vol. 14(2), pages 143-159, April.
    17. Hsing-Hsiang Huang & Michael R. Moore, 2018. "Farming under Weather Risk: Adaptation, Moral Hazard, and Selection on Moral Hazard," NBER Chapters, in: Agricultural Productivity and Producer Behavior, pages 77-124, National Bureau of Economic Research, Inc.
    18. B. Boockmann & Paul Thurner, 2006. "Flexibility provisions in multilateral environmental treaties," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 6(2), pages 113-135, June.
    19. Austin L. Wright, 2016. "Economic Shocks and Rebel," HiCN Working Papers 232, Households in Conflict Network.
    20. Elisabetta Iossa & David Martimort, 2012. "Risk allocation and the costs and benefits of public--private partnerships," RAND Journal of Economics, RAND Corporation, vol. 43(3), pages 442-474, September.

    More about this item

    Keywords

    Debt Markets; Emerging Markets; Labor Policies; Contract Law; Investment and Investment Climate;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:6738. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Roula I. Yazigi (email available below). General contact details of provider: https://edirc.repec.org/data/dvewbus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.