Journal Article

Determinants of Nationalization in the Oil Sector: A Theory and Evidence from Panel Data

Sergei Guriev, Anton Kolotilin and Konstantin Sonin

in The Journal of Law, Economics, and Organization

Volume 27, issue 2, pages 301-323
Published in print August 2011 | ISSN: 8756-6222
Published online June 2009 | e-ISSN: 1465-7341 | DOI: https://dx.doi.org/10.1093/jleo/ewp011
Determinants of Nationalization in the Oil Sector: A Theory and Evidence from Panel Data

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In this article, we study nationalizations in the oil industry around the world during 1960–2006. We show, both theoretically and empirically, that governments are more likely to nationalize when oil prices are high and when political institutions are weak. We consider a simple dynamic model of the interaction between a government and a foreign-owned oil company. Even though nationalization is inefficient, it does occur in equilibrium when oil prices are high. The model's predictions are consistent with the analysis of panel data on nationalizations in the oil industry around the world since 1960. Nationalization is more likely to happen when oil prices are high and the quality of institutions is low, even controlling for country fixed effects.

Keywords: D23; L33; L71; P48

Journal Article.  8520 words.  Illustrated.

Subjects: Other Economic Systems ; Primary Products ; Nonprofit Organizations and Public Enterprise ; Production and Organizations

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