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Competition for natural resources and the hold‐up problem

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  • Carsten Hefeker
  • Sebastian G. Kessing

Abstract

We study the role of competition for the hold‐up problem in foreign direct investment in resource‐based industries. The host country government is not only unable to commit not to expropriate investment ex post but also unable to commit to the provision of local resources. In the case of competition for local resources, this dual commitment problem triggers higher investment levels and increases host country revenues, but hurts profits of international investors. Concurrence pour les ressources naturelles et le problème du hold‐up. Les auteurs étudient le rôle de la concurrence pour le problème du hold‐up dans l’investissement direct de l’étranger dans les industries basées sur les ressources naturelles. Le gouvernement du pays hôte est incapable non seulement de s’engager à ne pas exproprier l’investissement ex post mais est aussi incapable de s’engager à fournir les ressources locales. Dans le cas de concurrence pour les ressources locales, ce double problème d’engagement enclenche des niveaux d’investissements plus élevés et accroît les revenus du pays hôte, mais réduit les profits des investisseurs internationaux.

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  • Carsten Hefeker & Sebastian G. Kessing, 2017. "Competition for natural resources and the hold‐up problem," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 50(3), pages 871-888, August.
    • Handle: RePEc:wly:canjec:v:50:y:2017:i:3:p:871-888
    DOI: 10.1111/caje.12281
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    Cited by:

    1. Ramin Dadasov & Carsten Hefeker & Oliver Lorz, 2014. "Natural Resource Production, Corruption, and Expropriation," MAGKS Papers on Economics 201436, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    2. 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.

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    More about this item

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • 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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