Working Paper: CEPR ID: DP6755
Authors: Sergei Guriev; Anton Kolotilin; Konstantin Sonin
Abstract: In this paper we study nationalizations in the oil industry around the world in 1960-2002. We show, both theoretically and empirically, that governments are more likely to nationalize when oil prices are high and when political institutions are weak. We consider a simple dynamic model of the interaction between a government and a foreign oil company. The government cannot commit to abstain from expropriation and the company cannot commit to pay high taxes. Even though nationalization is inefficient it does occur in equilibrium when oil prices are high. The model's predictions are consistent with the panel analysis of a comprehensive dataset on nationalizations in the oil industry since 1960. Nationalization is more likely to happen when oil prices are high and the quality of institutions is low even when controlling for country fixed effects.
Keywords: nationalization; oil industry; property rights
JEL Codes: D23; L33; L71; P48
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| human capital (J24) | likelihood of expropriation (H13) |
| high oil prices (Q31) | likelihood of expropriation (H13) |
| weak political institutions (P16) | likelihood of expropriation (H13) |