Productivity, Nationalization, and the Role of 'News': Lessons from the 1970s

Melek, Nida Cakir

doi:10.2139/ssrn.2813397

Cited by 1 publication

(3 citation statements)

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“…Our main hypothesis is that international oil companies perceived the 1958 shift in leasing policies not as a mere threat of nationalisation by the Venezuelan government, but rather as an ‘early notification’ and adjusted their time horizon accordingly. A similar claim is advanced by Cakir‐Melek () who uses data on the Venezuelan oil industry to calibrate a dynamic model of a representative foreign firm and simulate the response to 1961 ‘news’ that a nationalisation was expected to materialise by 1970. The model predicts that foreign firms would increase extraction effort and reduce exploratory efforts in anticipation of nationalisation, although no indication is given as to how firms came about such ‘news’ and the adjustment predicted by the model is slower than what is actually observed in the data.…”

Section: Introductionmentioning

confidence: 72%

“…In the case of the Venezuelan oil industry, it is left for future research a careful study of the 1970–75 period, when both sides entered in a tic‐for‐tac game of tax hikes and production cuts. As Cakir‐Melek () puts it: ‘Fear of nationalization leading to no exploration and more extraction eventually can make nationalization inevitable. So, there is a possibility of a self‐fulfilling nationalization’ (p. 23).…”

Section: Discussionmentioning

confidence: 99%

“…(), Guriev et al . (), Kennedy and Tiede (), Hajzler (), Warshaw (), Cakir‐Melek (), Hajzler (), Mahdavi (), and the literature there cited.…”

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Oil nationalisations as protracted affairs: evidence from Venezuela

Portillo

2016

OPEC Energy Review

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Empirical studies tend to treat oil nationalisations as basically discrete, sudden events, an approach that in some cases might be misleading and adds little to disentangle causality. On a contrary vein, we take a closer look at the 1970s nationalisation of Venezuela's oil industry and find evidence that this was a rather protracted affair, expanding over a 17‐year period. We argue that although the transfer of all assets to government hands was not completed until 1975, oil companies fully anticipated such move as early as 1958 and started to operate in a way compatible with a much shorter time horizon. Specifically, we use an estimate of the resource rent (defined as output price minus marginal extraction cost) to show a major shift in oil firms' implicit time horizon after 1958. Our results help to explain the rather weak causality link found in the data between oil nationalisations and price fluctuations.

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Section: Introductionmentioning

confidence: 72%

Section: Discussionmentioning

confidence: 99%