Political Risk Insurance: A New Firm-level Data Set

Abstract

When do governments impose costs on foreign firms? Many studies of foreign direct investment focus on incentives for government expropriation, but scholars are often forced to rely on indirect measures of expropriation to conduct empirical analyses. This article introduces a data set which includes information on over 5,000 political risk insurance contracts issued by the US Overseas Private Investment Corporation since 1961, and on all the claims filed by investors under these contracts. These detailed insurance data allow us to study the determinants of foreign investors’ losses from a variety of sources, including expropriation, inconvertibility, and violent conflict. To illustrate the benefits of these data for hypothesis testing, we adopt a comprehensive empirical approach and explore both shared and distinct causes across risk categories.

Covert Confiscation: How Governments Differ in Their Strategies of Expropriation

“…13.While other data on expropriations exist, they are less well-suited to our current purpose. For example, recent work by Arel-Bundock et al (2020) provides an alternative dataset of expropriations. However, this data only includes expropriations covered under contracts issued by the US Overseas Private Investment Corporation, which is limiting for the present task.…”

Strategies for Attracting Foreign Direct Investment (FDI): Assessing the Effectiveness of Post-Conflict Peacebuilding Mechanisms in the International Capital Markets

“…Decisions to invest are quite risk averse and therefore many multinational corporations particularly those in the United States choose to insure their investments (Arel-Bundock et al 2020). In addition to this, many of these same MNCs adhere to a phenomenon called follow the flag wherein firms invest in countries where U.S. troops are stationed.…”

“…Within this study, I theorize based on the assumption that states do retain agency in the process of attracting foreign capital. This has been explored in studies that analyze the effect of regime type, economic policy, and political policymaking etcetera, on changes in FDI (Jensen 2012;Biglaiser and Staats 2010;Li 2006;Arel-Bundock et al 2020;Jeong 2021;Joshi and Quinn 2018). I argue that nations can draw FDI to themselves by putting in place post conflict power-sharing mechanisms that bridge the gap of discontent amongst different warring sides, consequently creating an attractive landscape for investors.…”