Events at CERGE-EI

Gerhard Toews, Ph.D.

New Economic School, Russia

Abstract: In the late 1960s, Western powers reduced military interventions, weakening international contract enforcement and increasing expropriation risk in developing countries. This led to the emergence of self-enforcing agreements characterized by backloading—delays in production and taxation—and higher government rent-shares. Using oil industry data and a new backloading measure, we find that following this geopolitical shift, production and taxes were delayed by 3–5 years, resulting in annual revenue losses of $1 billion per country. The associated tax income loss for governments was offset by an increased rent-share. U.S. military deployments in the 1980s revived international contract enforcement, reducing backloading and government rent-shares.