Extortion and political-risk insurance

• 成果类型: Article
• 署名作者: Koessler, Frederic; Lambert-Mogiliansky, Ariane
• 署名单位: Paris School of Economics; Centre National de la Recherche Scientifique (CNRS)
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• DOI: 10.1016/j.jpubeco.2014.09.006
• 发表日期: 2014
• 页码: 144-156
• 关键词: Auctions; CORRUPTION; EXPROPRIATION; extortion; governance; Harassment; mechanism design; Political-risk insurance

摘要

We consider the problem faced by firms operating in a foreign country characterized by weak governance. Our focus is on extortion based on the threat of expropriation and bureaucratic harassment. The bureaucrat's bargaining power is characterized by a general extortion mechanism adapted from the optimal auction theory in Myerson (1981). This characterization is used to analyze the determinants of the quality of governance and whether and how this is improved by political-risk insurance. This insurance reduces the bureaucrat's total revenue from corruption, but may also increase the risk of expropriation and extortion bribes. The analysis allows us to derive some policy recommendations with respect to public intervention in the political-risk insurance sector. (C) 2014 Elsevier B.V. All rights reserved.