Government Actors Government Actors and Acts of and Acts of

ExpropriationExpropriationNathan M. JensenNathan M. Jensen

Washington University in St. LouisWashington University in St. Louis

Jeremy CaddelJeremy CaddelWashington University in St. LouisWashington University in St. Louis

Research QuestionResearch Question

Which government actors lead to Which government actors lead to contract disputes between countries contract disputes between countries and MNCs?and MNCs?

How do political institutions affect How do political institutions affect these risks?these risks?

Rule of LawRule of Law

Rule of Law and Development Rule of Law and Development (North and Weingast 1989; North 1990; (North and Weingast 1989; North 1990;

Olson 1993, 2000).Olson 1993, 2000).

Rule of Law and International Rule of Law and International Investment Investment (Vernon 1971; Friden 1994)(Vernon 1971; Friden 1994)

Political Risk and FDIPolitical Risk and FDI

InstitutionsInstitutions Democratic RegimesDemocratic Regimes Veto Players/Political ConstraintsVeto Players/Political Constraints CourtsCourts Bilateral Investment TreatiesBilateral Investment Treaties

PreferencesPreferences PartisanshipPartisanship Time horizonsTime horizons LearningLearning

Empirical WorkEmpirical Work Flows of FDIFlows of FDI

(Li and Resnick 2003; Jensen 2003; Busse 2004; (Li and Resnick 2003; Jensen 2003; Busse 2004; Ahlquist 2006; Büthe and Milner 2008)Ahlquist 2006; Büthe and Milner 2008)

MNC entry strategyMNC entry strategy(Henisz 2002; Desai et al 2008)(Henisz 2002; Desai et al 2008)

Political risk insurance premiumsPolitical risk insurance premiums(Jensen 2008)(Jensen 2008)

Country/regime expropriationCountry/regime expropriation(Jodice 1980; Kobrin 1984; Minor 1994; Li 2009)(Jodice 1980; Kobrin 1984; Minor 1994; Li 2009)

Investment Climate Surveys Investment Climate Surveys (Weymouth and Broz 2009; Biglaiser and Staats (Weymouth and Broz 2009; Biglaiser and Staats

2010)2010)

International Centre for International Centre for Investment Disputes Investment Disputes

(ICSID)(ICSID) ICSID clauses in bilateral investment ICSID clauses in bilateral investment

treatiestreaties(Yackee 2007, 2008, Kerner 2009, Allee and (Yackee 2007, 2008, Kerner 2009, Allee and

Peinhardt 2009)Peinhardt 2009)

156 Country Member156 Country Member

Role of Private PartiesRole of Private Parties Firms can initiate disputesFirms can initiate disputes Do not have to exhaust domestic remediesDo not have to exhaust domestic remedies

DataData

Sources:Sources: Completed ICSID cases (180): case factsCompleted ICSID cases (180): case facts Media sources, company information, case Media sources, company information, case

studiesstudies

CodingCoding Government actor initiating disputeGovernment actor initiating dispute Secondary actors involved in the disputeSecondary actors involved in the dispute

ICSID DisputesICSID Disputes

ActorActor DisputesDisputes

ExecutiveExecutive 1010

MinistryMinistry 3434

Executive BranchExecutive Branch 4444

LegislatureLegislature 55

SubnationalSubnational 1212

State-Owned FirmState-Owned Firm 1212

Other AgencyOther Agency 2424

Total: OtherTotal: Other 4848

Empirical AnalysisEmpirical Analysis Dependent Variable (1970-2006)Dependent Variable (1970-2006)

Country-year dispute (1= dispute, 0 = Country-year dispute (1= dispute, 0 = otherwise)otherwise)

Separating executive from other disputesSeparating executive from other disputes

Key Independent variablesKey Independent variables Political regime and political constraintsPolitical regime and political constraints

MethodsMethods Logit model with cubic splines Logit model with cubic splines Robustness (rate event logit, etc)Robustness (rate event logit, etc)

Preliminary Empirical Preliminary Empirical AnalysisAnalysis

ExEx

DisputDisputee

Non-Non-ExEx

DisputDisputee

ExEx

DisputDisputee

Non-Non-ExEx

DisputDisputee

RegimeRegime -0.036*-0.036*

(0.019)(0.019)-0.009-0.009

(0.018(0.018))

Political Political ConstraintsConstraints

0.6380.638

(0.436(0.436))

--1.0011.001****

(0.459(0.459))

ObservationObservationss

1,9971,997

(111)(111)1,9971,997

(111)(111)2,0382,038

(113)(113)2,0382,038

(113)(113)

Main Controls: log GDPPC, dispute counter, Main Controls: log GDPPC, dispute counter, splinessplines

Robustness: FDI flows, regional dummies, Robustness: FDI flows, regional dummies, etcetc

ConclusionsConclusions

Political institutions affect non-Political institutions affect non-executive disputes but not executive executive disputes but not executive disputesdisputes

Legislative initiated disputes are Legislative initiated disputes are very rarevery rare

Future WorkFuture Work

Data CollectionData Collection Expropriations from 1990-PresentExpropriations from 1990-Present OPIC Political Risk Insurance ClaimsOPIC Political Risk Insurance Claims Past ExpropriationsPast Expropriations

Data codingData coding Government actorsGovernment actors Types of actionsTypes of actions

Active dispute vs. failing to actActive dispute vs. failing to act Relationship between actors Relationship between actors

Independence of ministriesIndependence of ministries