NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Host-MNC Relations in Resource-Rich Countries

Natasha Chichilnisky-Heal, Geoffrey Heal

NBER Working Paper No. 21712
Issued in November 2015
NBER Program(s):   DEV   EEE   POL

We discuss the relationship between a resource-rich developing country and a multi-national corporation (MNC) that is developing its resources for the international market. We model the connections between transparency, permeability (defined as the amount of resource rent that leaves the country) and economic development, considering the cases of democracy and autocracy. We begin by considering the role of permeability in domestic politics, showing that a decrease in permeability will always benefit the incumbent, whether the country is a democracy or an autocracy. We then suggest that the relation between the host and the MNC has the features of a classical and quite intractable version of the hold-up problem, and that this may provide the MNC with incentives to influence political outcomes within the host country by whatever means are at its disposal. The hold-up problem can be overcome by the use of a Bilateral Investment Treaty that restricts the host country's ability to alter the terms of any agreement into which it has entered, and we investigate why a country might enter into a treaty that limits its freedom of action in this way. A possible answer is to be found in the capacity of a small number of poor countries to “tip” an equilibrium where none sign such treaties to one where all sign, in the process making all worse off. Our analysis provides a micro foundation for the “obsolescing bargain model” of host-MNC relations.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Access to NBER Papers

You are eligible for a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w21712

Users who downloaded this paper also downloaded* these:
Hulten Total Factor Productivity: A Short Biography
Edlund, Machado, and Sviatschi w21729 Bright Minds, Big Rent: Gentrification and the Rising Returns to Skill
Bordo and Siklos w21710 Central bank Credibility Before and After the Crisis
Harrison, Hyman, Martin, and Nataraj w21763 When do Firms Go Green? Comparing Price Incentives with Command and Control Regulations in India
Acemoglu and Robinson w20766 The Rise and Decline of General Laws of Capitalism
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us