Repeated Expropriation Contests and Foreign Direct Investment

This Paper considers the incentives for foreign direct investment in transformation countries if actual expropriation is the possible result of a conflict between multinational firms and local or national governments. The Paper compares threats of complete expropriation and of repeated period-revenue confiscation. The Paper also shows that the timing of efforts in the contests is essential for the size of underinvestment. Short term commitment as regards timing can lead to first-best investment levels.