search query: @indexterm Expropriation / total: 13
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| Author: | Cole, H. L. English, W. B. |
| Title: | Expropriation and direct investment |
| Journal: | Journal of International Economics
1991 : MAY, VOL. 30:3-4, p. 201-227 |
| Index terms: | EXPROPRIATION FOREIGN INVESTMENT ECONOMIC THEORY FINANCIAL RISK CAPITAL INVESTMENT GOVERNMENT DEVELOPING COUNTRIES |
| Language: | eng |
| Abstract: | At least since Keynes (1924), economists have realized that foreign investments suffer from political as well as economic risk. As a result, lenders and investors must consider the government's decision to expropriate foreign assets. A model is provided in which private foreign investors make direct long-lived capital investments in a small developing country that is subject to stochastic shocks to production. Depending upon the preferences of the host country, it was found that expropriation can occur because of either "desperation" or "opportunism". It is shown that under reasonable assumptions increased investment makes expropriation less likely to occur. The optimal level of investment is also investigated. |
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