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Natural resource extraction, corruption, and expropriation

Author

Listed:
  • Ramin Dadasov

    (Hertie School of Governance)

  • Carsten Hefeker

    (University of Siegen
    CESifo)

  • Oliver Lorz

    (RWTH Aachen University)

Abstract

We develop a formal model that looks at the mutually endogenous determination of foreign direct investments in the extraction of natural resources, at the decision of host governments to expropriate these investments, and at the level of corruption. Higher investments in resource extraction make expropriation more attractive from the perspective of national governments. A low expropriation risk is in turn an important determinant of international investments and is therefore associated with high levels of resources extraction. Moreover, investments in the resource sector also raise corruption. Our theoretical predictions are confirmed by estimations of a simultaneous equation model in which we endogenize expropriation risk, corruption, and resource extraction.

Suggested Citation

  • Ramin Dadasov & Carsten Hefeker & Oliver Lorz, 2017. "Natural resource extraction, corruption, and expropriation," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 153(4), pages 809-832, November.
    • Handle: RePEc:spr:weltar:v:153:y:2017:i:4:d:10.1007_s10290-017-0288-y
    DOI: 10.1007/s10290-017-0288-y
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    2. Hussain, Jamal & Khan, Anwar & Zhou, Kui, 2020. "The impact of natural resource depletion on energy use and CO2 emission in Belt & Road Initiative countries: A cross-country analysis," Energy, Elsevier, vol. 199(C).

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    More about this item

    Keywords

    Natural resources; Expropriation; Foreign direct investment; Institutions;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)

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