Working Paper: CEPR ID: DP2695
Authors: Kai A. Konrad
Abstract: This Paper considers the incentives for foreign direct investment in transformation countries if actual expropriation is the possible result of a conflict between multinational firms and local or national governments. The Paper compares threats of complete expropriation and of repeated period-revenue confiscation. The Paper also shows that the timing of efforts in the contests is essential for the size of underinvestment. Short term commitment as regards timing can lead to first-best investment levels.
Keywords: confiscatory taxation; conflict; expropriation; foreign direct investment; fractionalization; nationalization
JEL Codes: F21; F23; G15; H87
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| fractionalization of power (H77) | decreased investment attractiveness (G31) |
| decreased investment attractiveness (G31) | discouragement of FDI (F23) |
| fractionalization of power (H77) | discouragement of FDI (F23) |
| delays in expropriation attempts (H13) | better investment outcomes (G11) |
| expropriator expending resources (H13) | mitigation of underinvestment problem (G31) |