Stroebel, Johannesvan Benthem, Arthur2023-05-222023-05-222013-12-012016-05-26https://repository.upenn.edu/handle/20.500.14332/5182We use fiscal data on 2,468 oil extraction agreements in 38 countries to study tax contracts between resource-rich countries and independent oil companies. We analyze why expropriations occur and what determines the degree of oil price exposure of host countries. With asymmetric information about a country's expropriation cost, even optimal contracts feature expropriations. Near linearity in the oil price of real-world hydrocarbon contracts also helps to explain expropriations. We show theoretically and verify empirically that oil price insurance provided by tax contracts is increasing in a country's cost of expropriation and decreasing in its production expertise. The timing of actual expropriations is consistent with our model.BusinessEconomicsPublic Affairs, Public Policy and Public AdministrationArticle