Abstract
Political risk should be a concern to any investor evaluating the potential of a foreign investment. This is especially true in the extractive industries where hold up problems, common to sunk cost investments, may appear in the form of Vernon's obsolescing bargain. This paper surveys the political risk literature and current evaluation methods available to natural resource investors; discusses strengths and weaknesses of the approaches; and offers possible considerations for future work. Although substantial contributions have been made, much work remains to be done, such as more quantitative assessments which can be directly incorporated into economic analysis of potential projects.
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