I’ll pay you later: Sustaining relationships under the threat of expropriation
21 June 2022
SITE and NES (New Economic School) researchers investigate how multinational firms manage their relationships with governments under the threat of expropriation. Exploring micro data from the oil and gas industry worldwide, they show that the multinationals delay investment, production and tax payments by more than five years in countries with weak institutions relative to countries with strong ones. These findings are consistent with the theory suggesting that delaying rents to the government in absence of formal enforcement could decrease the risk of expropriation.