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Competition for Natural Resources and the Hold-Up Problem

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  • Kessing, Sebastian
  • Hefeker, Carsten

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 is 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, increases host countries revenues, but hurts profits of international investors. Domestic firms can play a similar role as an alternative instrument for host country governments to generate higher foreign investment in an environment of weak property rights.

Suggested Citation

  • Kessing, Sebastian & Hefeker, Carsten, 2014. "Competition for Natural Resources and the Hold-Up Problem," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100361, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc14:100361
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    Cited by:

    1. 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.
    2. 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).

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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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