Expropriation of foreign direct investments: sectoral patterns from 1993 to 2006

This paper documents expropriation of foreign direct investment (FDI) across all developing countries for the 1993–2006 period, extending data constructed for earlier decades. This unique data set on worldwide expropriation between 1960 and 2006 is used to highlight several (interrelated) stylized facts. First, although expropriations have become less frequent compared to the 1970s, the number of takings has risen since the mid-1990s. Second, foreign firms are more vulnerable to expropriation in resource-based sectors, particularly in mining and petroleum. Third, the timing of expropriation coincides with fluctuations in mineral output price levels. Finally, when newly constructed FDI stock estimates are used to compare the sectoral distribution of FDI of recent expropriating countries to that of non-expropriating countries, average resource-based FDI shares are higher in expropriating countries; however, this difference is not reflected in higher value added shares for the expropriating group. This last fact is puzzling given that natural resource-based FDI has traditionally been considered high risk.