Threat Of Expropriation Research Articles

Bribery, hold‐up, and bureaucratic structure

AbstractWe consider infrastructure provision by a foreign investor when the domestic bureaucracy is corrupt, but also cares for domestic welfare. Bureaucrats bargain with the investor over price and (potentially) bribes, both before the investment is sunk and afterwards, using the threat of expropriation. We show that domestic welfare may be greater in equilibria with bribery than in equilibria without. We specify conditions under which changes in the degree of bureaucratic centralization or of bureaucratic care have a positive, negative, or nonmonotonic effect on domestic welfare. The impact of centralization on domestic welfare is mediated through the level of bureaucratic care.

Oil at risk: Political violence and accelerated carbon extraction in the Middle East and North Africa

Abstract What effect does the threat of expropriation have on resource extraction? Much of the economic literature suggests that uncertainty reduces investment, but the theory of risk-induced extraction suggests the opposite. In this paper, we test this theory in the context of political violence, which poses a real threat of state destabilization and violent expropriation of property rights. Facing this uncertainty, we find that oil producers in the Middle East and North Africa increase oil production in response to political violence. This finding has important negative consequences for the world in terms of climate change and demonstrates a previously untested mechanism through which exhaustible resource supply is flooding the market.

Calling the cavalry: firm-level investment in the face of decentralized expropriation

AbstractWhat characteristics of firms give them the confidence to invest in settings rife with expropriation by local officials? Empirically, firms in the developing world often face the threat of expropriation from local agents of the state rather than a centralized autocrat. Because policing local officials is costly, the state cannot easily credibly commit to doing so. This has negative consequences for investment. We argue that one solution is to allow firms to approach the state directly to ask for intervention. Not all firms are equally able to successfully get the attention of the state, however, so this mechanism only works for some. We develop an argument about the firm-level characteristics – large-scale employment, political connections, foreign ownership, and business association membership – that should make the central state more attentive to calls for help. Because firm with these characteristics are more likely to secure intervention against predatory bureaucrats, the latter are less likely to try to expropriate them. These firms' investment decisions should be less sensitive to local expropriation than other firms. We test this argument using data on cases of decentralized expropriation across Russia's regions and firm-level data from a cross-regional, large scale survey of Russian firms.

The Institutional Foundations of Religious Politics: Evidence from Indonesia*

AbstractThis article explores the foundations of religious influence in politics and society. We show that an important Islamic institution fostered the entrenchment of Islamism at a critical juncture in Indonesia, the world’s largest Muslim country. In the early 1960s, rural elites transferred large amounts of land into waqf—inalienable charitable trusts in Islamic law—to avoid expropriation by the state. Regions facing a greater threat of expropriation exhibit more prevalent waqf land and Islamic institutions endowed as such, including mosques and religious schools. These endowments provided conservative forces with the capital needed to promote Islamist ideology and mobilize against the secular state. We identify lasting effects of the transfers on the size of the religious sector, electoral support for Islamist parties, and the adoption of local sharia laws. These effects are shaped by greater demand for religion in government but not by greater piety among the electorate. Waqf assets also impose costs on the local economy, particularly in agriculture, where these endowments are associated with lower productivity. Overall, our findings shed new light on the origins and consequences of Islamism.

JORGE AMADO, 1964: SOBRE LITERATURA E CIDADE*

Em Os pastores da noite, romance escrito às vésperas do golpe civil-militar de 1964, Jorge Amado apresenta mulheres e homens de alegrias e saberes abundantes, eméritos em festas, lutas sociais e políticas, contra a imposição do trabalho e da exploração. Relações e encontros nesse romance agregam o compadrio de divindades, reunindo religiões e homens num mesmo espaço histórico, evidenciando que dicotomias e divisões podem ser superadas. Os pastores são trabalhadores da “cidade da Bahia”, vivendo a ameaça da expropriação da terra e do direito à moradia, e que resistem às “gargalhadas”. A literatura de Jorge Amado, além de matéria na disputa pela pluralidade de vozes na pesquisa histórica, constitui fonte importante na discussão sobre a cidade e modos culturais do viver urbano, contribuindo especificamente com a obra aqui analisada para pensarmos a construção de ditaduras na sociedade brasileira.PALAVRAS-CHAVE: Jorge Amado, os pastores da noite, golpe civil-militar de 1964, resistência, cidade.* Para a elaboração deste artigo foi importante o apoio do Programa Nacional de Cooperação Acadêmica da Coordenação de Aperfeiçoamento de Pessoal de Nível Superior (PROCAD/CAPES), através do projeto “Trabalho, Cultura e Cidade” (PUC-SP/UFAM/UFCG).

Remittances and varieties of democratization in developing countries

ABSTRACTHow do remittances affect democratization in developing countries? In this paper we reconcile divergent findings in the literature by examining the effect of remittances on procedural and liberal democracy in developing countries at various stages of their democratic development. Remittances are primarily sent to middle-class individuals and bypass government control. Yet, governments in countries receiving remittances want to tax this remittance income. Government officials therefore need to incentivize participation of the middle class in the formal economy by reducing the threat of expropriation. Improving procedural democracy, which assures citizens of improved property and rule of law protections, is one way to accomplish this. We argue that this relationship should only be present in mixed regime types, with the democratizing effect of remittances waning as the country’s level of democracy or autocracy strengthens. Further, we expect elements of liberal democracy, such as civil rights and equality under the law, to remain unchanged in all remittance-receiving countries. The middle class and governing elite are less incentivized to improve liberal democracy to limit the power and mobilization capacity of the poor and prevent increased redistribution. We test our theory on a dataset of developing countries from 1975 through 2011.

THE PROBLEM OF PERSONALITY IN “ME, MYSELF AND I” BY EDWARD ALBEE

In the very beginning of the play “Me, Myself and I” by Edward Albee one of the twin brothers addresses the readers and spectators declaring that he is on the stage to make problems and to make things even more complicated than they are. He tries to get rid of his family and get out of all that mess. Wit and irony dominate in the play, that is why the playwright manages to attract, disappoint and upset the reader and the spectator. The play “Me, Myself and I” is created in its unique and original genre with the use of original stylistic, both linguistic and visual devices. The topic of subjectivity and the relationship between reality and imagination and reality in a literary work occupy the central position in the play. The motive of the twins is reiterated from folklore literature to the works of Shakespeare, Poe, Dickens, Wilde, Borges and many others. This topic is often treated as an instance of split personality; it belongs to the realm of the carnival, monstrous and supernatural and suggests a threat of expropriation of the personality. The play “Me, Myself and I” represents a meta and intertextual argumentation. To understand this reasoning, the reader or spectator needs to know and understand various theatrical conventions and numerous references to literary works. The protagonist of the play is completely unbalanced, he is in constant struggle. In order to achieve harmony, he has to return to uncertainty. The present article analyses the methods used by Albee to transform the stage into a meta- and intertextual “space”, at the same time undermining any belief in the personality and language as fixed, stable and functional entities.

Patent Prosecution And The Timing Of Licensing

Patents are expected to facilitate trade in markets for technology by limiting the threat of expropriation by a potential licensee and encouraging greater disclosure of the invention. A patent clearly specifies the nature of the rights, with respect to the technology, that are conveyed in a licensing agreement and the specific economic activities that the licensee can engage in with regard to the invention without legal threat. Previous research has shown that patent allowance, the point at which an examiner delineates the specific claims that can be granted under the patent facilitates licensing (Gans, Hsu and Stern, 2008). However such research is based on selected data – concluded licenses. In this paper we improve on such research by including not only licenses that were concluded but also those that were attempted but abandoned. In addition, we do not restrict ourselves only to the allowance step of the patent prosecution process but instead look at whether patent filing and patent grant influence licensing as well.

Understanding Investor Behavior in the Recent Global Land Rush

Abstract A sharp rise in land acquisitions in developing countries during the last decade has drawn the attention of scholars and think tanks. Recent empirical literature finds that investors acquiring land tend to target countries that have little regard for local land rights. This is a puzzle. By locating in such countries, investors may be foregoing other advantages that generate more revenue. In this paper, I provide an explanation of investor behavior using a game-theoretic model where investors can use expropriation as a credible threat vis a vis smallholders. I show that the credible threat of expropriation lowers the investor’s cost of locating to a country by reducing the necessary remuneration to smallholders for access to land, resulting in adverse incorporation. Further, I demonstrate that investors will locate in countries with weak land governance whenever they anticipate similar levels of revenue or investor protection.

Bribery, Hold-Up and Bureaucratic Structure

We analyze the provision of infrastructure by a foreign investor when the domestic bureaucracy is corrupt, but puts some weight on domestic welfare. The investor may pay a bribe in return for a higher provisional contract price. After the investment has been sunk, the bureaucracy may hold up the investor, using the threat of expropriation to demand a lower final price or another bribe. Depending on the level of care for domestic welfare, greater bureaucratic centralization may increase or decrease domestic welfare. Because of the threat of hold-up, bribery may result in greater domestic welfare than the honest benchmark does.

Index EMBI as an indicator of country risk and its impact on the investment decision of MNC in the developing countries

In this paper specific country risks, typical for the developing and transforming countries, in connection with their influence on the foreign direct investments (FDI) and the multinational corporations (MNCs) were investigated both theoretically and empirically. Such risks, for instance, could be protective actions of a state to protect domestic producers, discriminatory fiscal policy, bureaucracy, corruption, or even the direct threat of expropriation of the foreign affiliates of MNCs etc. The econometric analysis was made in order to study the impact of country risks on FDI and MNCs abroad. Using a regression model the author has determined the universal indicator for reflecting the risks for FDI activities in the developing countries. It was assumed that the Stripped Spread of Emerging Market Bond Index (EMBI+ Stripped Spread) may represent well a financial or investment risk in the developing country or region as far as spread is a premium or fee obtained by the international investor with the acquiry and holding the risky bonds in the developing market. This assumption was the base for the econometric regression model to use the spread of index EMBI as a proper measure of a country risk. As a result the negative relationship between the index EMBI and the foreign direct investment of MNCs was detected and confirmed like it was predicted before the analysis. Hence, the negative impact of the country risk on the FDI and activities of MNCs in the developing countries was proven empirically too.

R&D Collaboration with Uncertain Intellectual Property Rights

Patent pendencies create uncertainty in research and development (R&D) collaboration, which can result in a threat of expropriation of unprotected knowledge, reduced bargaining power and enhanced search costs. We show that—depending of the type of collaboration partner and the size of the company—uncertain intellectual property rights (IPRs) lead to reduced collaboration between firms and can, hence, hinder knowledge production. This has implications for technology policy as R&D collaborations are exempt from antitrust legislation in order to increase R&D in the economy. We argue that a functional IPR system is needed for successful utilization of this policy.

Extortion and political-risk insurance

We consider the problem faced by firms operating in a foreign country characterized by weak governance. Our focus is on extortion based on the threat of expropriation and bureaucratic harassment. The bureaucrat's bargaining power is characterized by a general extortion mechanism adapted from the optimal auction theory in Myerson (1981). This characterization is used to analyze the determinants of the quality of governance and whether and how this is improved by political-risk insurance. This insurance reduces the bureaucrat's total revenue from corruption, but may also increase the risk of expropriation and extortion bribes. The analysis allows us to derive some policy recommendations with respect to public intervention in the political-risk insurance sector.

Modularity and intellectual property protection

Modularity is a means of partitioning technical knowledge about a product or process. When state‐sanctioned intellectual property (IP) rights are ineffective or costly to enforce, modularity can be used to hide information and thus protect IP. We investigate the impact of modularity on IP protection by formally modeling the threat of expropriation by agents. The principal has three options to address this threat: trust, licensing, and paying agents to stay loyal. We show how the principal can influence the value of these options by modularizing the system and by hiring clans of agents, thus exploiting relationships among them. Extensions address screening and signaling in hiring, the effects of an imperfect legal system, and social norms of fairness. We illustrate our arguments with examples from practice.© 2014 The Authors. Strategic Management Journal published by John Wiley & Sons Ltd.

Challenges of Implementing Infrastructure Megaprojects through Public-Private Partnerships in Nigeria: A Case Study of Road Infrastructure

Nigeria’s infrastructure deficit, especially in transport sector is appalling. This triggered the Lagos state government to start addressing its infrastructure deficit through PPPs. The purpose of this paper is to identify the challenges at both development phase and implementation (construction) phase of PPP road infrastructure megaproject, and identify the critical success factors that actually made the project successful. The paper adopted case study approach within a mixed method paradigm employed to collect data. Semi structured interviews were used to collect data from the participants involved in the case study with a view to identifying the challenges and success factors. The identified challenges and success factors were incorporated into the questionnaire survey administered to the participants involved in the development and implementation stages of the case study. Data collected were analysed using descriptive and inferential statistics. The results of the Relative Significant Index ranking indicate that perceptions of Nigeria as a high risk economy by foreign investors, bureaucratic nature of the state government, schedule delay by administrative procedures, threat of expropriation and reluctance to tender/bid, and public/political opposition are the most highly ranked challenges experienced at development phase. The paper further identified unexpected increased quantity, bottleneck in securing execution of the federal government support agreement, resistance by residents, and problem of access to the right-of-way as the most ranked challenges witnessed at implementation (construction) phase. The results of factor analysis grouped the identified twenty two challenges into seven major factors at development phase, and grouped twelve identified challenges into four principal factors at implementation phase. The paper further identified four critical success factors using factor analysis that made the PPP project successful. These include enabling legislation with due diligence, strong commitment of both public and private sectors, strong financial package, and enabling environment and allocation of risk.

Modularity and Intellectual Property Protection

Modularity is a means of partitioning technical knowledge about a product or process. When state-sanctioned intellectual property (IP) rights are ineffective or costly to enforce, modularity can be used to hide information and thus protect IP. We investigate the impact of modularity on IP protection by formally modeling the threat of expropriation by agents. The principal has three options to address this threat: trust, licensing, and paying agents to stay loyal. We show how the principal can influence the value of these options by modularizing the system and by hiring clans of agents, thus exploiting relationships among them. Extensions address screening and signaling in hiring, the effects of an imperfect legal system, and social norms of fairness. We illustrate our arguments with examples from practice.

Resource Extraction Contracts Under Threat of Expropriation: Theory and Evidence

Abstract We use fiscal data on 2,468 oil extraction agreements in 38 countries to study tax contracts between resource-rich countries and independent oil companies. We analyze why expropriations occur and what determines the degree of oil price exposure of host countries. With asymmetric information about a country's expropriation cost, even optimal contracts feature expropriations. Near linearity in the oil price of real-world hydrocarbon contracts also helps to explain expropriations. We show theoretically and verify empirically that oil price insurance provided by tax contracts is increasing in a country's cost of expropriation and decreasing in its production expertise. The timing of actual expropriations is consistent with our model.

Unbundling the Relationship between Authoritarian Legislatures and Political Risk

A strong statistical association between legislative opposition in authoritarian regimes and investment has been interpreted as evidence that authoritarian legislatures constrain executive decisions and reduce the threat of expropriation. Although the empirical relationship is robust, scholars have not provided systematic evidence that authoritarian parliaments are able to restrain the actions of state leaders, reverse activities they disagree with, or remove authoritarian leaders who violate the implied power-sharing arrangement. This article shows that authoritarian legislatures, by providing a forum for horse trading between private actors, are better at generating corporate governance legislation that protects investors from corporate insiders than they are at preventing expropriation by governments. The statistical analysis reveals that the strength of authoritarian legislatures is associated with corporate governance rules and not expropriation risk.

Management Insights

Management Insights

Does Corporate Governance Affect Stock Liquidity in the Tunisian Stock Market?

The aim of the current paper is to study the link between the effects of corporate governance on information asymmetry problems and stock liquidity in the Tunisian Stock Market. We use a sample of 49 Tunisian firms listed between 1998 and 2007. Our results show that corporate governance has direct and indirect effects on stock liquidity. Threat of expropriation exerted by family and foreign shareholders discourages reluctant investors,which decreases stock liquidity. In contrast, they invest their capital in State controlled firms. In fact, State is regarded as an effective controller rather than a shareholder. The State involvement in Tunisian firms is considered as state guarantee for investors, which increases stock liquidity. Our results provide evidence that some attributes of corporate governance improve stock liquidity because they reduce information asymmetry.