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Democracy and Expropriations

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Abstract

In this paper I develop a voting model that shows the different effects of democratic competition and political constraints on the probability of expropriations of foreign investments. I show that these two aspects of liberal democracy might have very different effects on expropriation risks. Particularly interesting is the prediction that for low to intermediate levels of political competition for executive power, increased competition will lead to higher risk of expropriation. Testing this and other predictions on panel data for actual expropriations in 27 developing countries, I find support for the predictions from the model.

Suggested Citation

  • Christensen, Jonas Gade, 2011. "Democracy and Expropriations," Working Papers in Economics 06/11, University of Bergen, Department of Economics.
    • Handle: RePEc:hhs:bergec:2011_006
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    References listed on IDEAS

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    More about this item

    Keywords

    Democracy; Expropriations; Foreign investments;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • 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

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