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PRODUCTIVITY, NATIONALIZATION, AND THE ROLE OF “NEWS”: LESSONS FROM THE 1970S

Published online by Cambridge University Press:  27 November 2018

Nida Çakir Melek
Nida Çakir Melek*
Affiliation:
Federal Reserve Bank of Kansas City
*
Address correspondence to: Nida Çakır Melek, Federal Reserve Bank of Kansas City, 1 Memorial Drive, Kansas City, MO 64198, USA; e-mail: nida.cakirmelek@kc.frb.org. Phone: (816) 283-7759. Fax. (816) 881-2807.
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Abstract

Occurrences of an old phenomenon, the expropriation of foreign-owned property, peaked in the 1970s when virtually every significant oil-producing developing country nationalized its oil. Nationalization was again on the rise in the 2000s. Using novel data, this paper quantitatively evaluates the effects of nationalization. First, the paper finds significant productivity losses associated with nationalization in a sample of oil-producing countries. Venezuela in particular experienced a striking decline in productivity. Second, the paper presents a new channel through which nationalization affects productivity: a long-term pre-announcement can shift the composition of the workforce with a huge decline in highly skilled foreign workers and result in higher extraction and lower exploration. Guided by a quantitative dynamic partial equilibrium framework disciplined by features of the Venezuelan data, this paper then evaluates the effects of nationalization. A comparison of the simulated and time series data shows that the model can explain about 80% of the productivity pattern over 1961–1980 in the Venezuelan oil industry. Counterfactual experiments suggest that the shift in the composition of the workforce is important in accounting for the productivity pattern. Furthermore, if nationalization had been sudden, long-run losses would have been lower.

Keywords

ProductivityNationalizationOilNews (Policy Foresight)Foreign Expertise
Type
Articles
Information
Macroeconomic Dynamics , Volume 24 , Issue 5 , July 2020 , pp. 1264 - 1298
Copyright
© Cambridge University Press 2018

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Footnotes

I am grateful to Lee E. Ohanian for his invaluable guidance and support, and to Paco Buera, Satyajit Chatterjee, Roger E. A. Farmer, Aaron Tornell, and Mark L. J. Wright for insightful discussions and comments. I thank the editor William Barnett, an associate editor, an anonymous referee, Jess Benhabib, Burcu Eyigungor, Gonzalo Llosa, Gonca Senel, Shi Wei, Pierre-Olivier Weill, Chad Wilkerson, all the seminar and conference participants at UCLA, OxCarre, Federal Reserve Bank of Kansas City, Missouri Economics Conference, Midwest Macro Meeting, North American Productivity Workshop, and SCE CEF for their helpful comments, and Elizabeth Cook for editorial help. The views expressed herein are my own and do not necessarily reflect those of anyone else affiliated with the Federal Reserve System. An earlier version of this paper circulated under the title “Productivity and Nationalization: Early Evidence and A Macroeconomic Analysis.”

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