Costs and consequences of the expropriation of FDI by host governments

There are no laws preventing a host government from seizing the capital of a foreign direct investment in its borders and then denying any compensation for the foreign investor. Why do we not see many more expropriations of investor capital by host governments? Compiling a database of expropriations within the minerals sectors of developing countries, I show that there is a cost for expropriation by a host government in the form of lower growth in the sectors of countries that expropriated in the past. It is possible to lose a bad reputation by a host government's actions after expropriation.

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Journal Article
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JEL Codes:
F21; N50; O13

 Record created 2017-04-01, last modified 2018-01-22

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