Turning Off the Tap: Determinants of Expropriation in the Energy Sector

14 Pages Posted: 20 Feb 2007

Date Written: February 15, 2007

Abstract

This paper analyzes the dependence of the decision of a government to expropriate foreign investment in the energy sector on macroeconomic factors and crude oil and natural gas prices. The contribution of the paper is two-fold. First, using data on eight countries that made recent steps to expropriate foreign investment in their respective energy sectors, we identify the factors that are significant for the decision. These factors are assumed to be invariant across countries. Second, we use our results to calculate the probability that the seven major petroleum exporters with at most partial state ownership will nationalize their respective energy sectors in the next month. The results of this paper can be used to design optimal exit strategies for companies invested in energy sectors in developing countries.

Keywords: Expropriation, foreign direct investment, energy sector, binary choice model

JEL Classification: F23, F52, Q48

Suggested Citation

Boyarchenko, Nina, Turning Off the Tap: Determinants of Expropriation in the Energy Sector (February 15, 2007). Available at SSRN: https://ssrn.com/abstract=963779 or http://dx.doi.org/10.2139/ssrn.963779

Nina Boyarchenko (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-7339 (Phone)
212-720-1582 (Fax)

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