RESOURCE EXTRACTION AND THE THREAT OF POSSIBLE EXPROPRIATION - THE ROLE OF SWISS BANK ACCOUNTS

This paper examines the consequences of resource owners being threaten ed with possible nationalization/expropriation. It shows that Long's [ J. Econom. Theory 10, 42-53, 1975] overextraction result critically de pends on availability of a relatively safer investment alternative. If all investment alternatives are similiarly uncertain, then resource e xtraction is efficient, but the overall savings-consumption decision i s distorted toward consumption. (C) 1994 Academic Press, Inc.