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Alternatives to local content

Author

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  • Ivar Kolstad
  • Abel Kinyondo

Abstract

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.

Suggested Citation

  • Ivar Kolstad & Abel Kinyondo, 2015. "Alternatives to local content," WIDER Working Paper Series wp-2015-106, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-2015-106
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    File URL: https://www.wider.unu.edu/sites/default/files/Publications/Working-paper/PDF/wp2015-106.pdf
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    References listed on IDEAS

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    Cited by:

    1. Macatangay, Rafael Emmanuel “Manny”, 2016. "Optimal local content requirement policies for extractive industries," Resources Policy, Elsevier, vol. 50(C), pages 244-252.
    2. Ovadia, Jesse Salah, 2016. "Local content policies and petro-development in Sub-Saharan Africa: A comparative analysis," Resources Policy, Elsevier, vol. 49(C), pages 20-30.

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    Keywords

    Public expenditures; Natural resources;

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