Consider two countries, A and B, and suppose that both have identical physical endowments of, say, iron ore. But in country A, any profits that are made from mining the ore are subject to confiscation by the government, while in country B, there is no such risk. How does the risk of expropriation affect the economic endowments of the two nations? In which nation are people richer, and why?
Consider two countries, A and B, and suppose that both have identical physical endowments of, say, iron ore. But in country A, any profits that are made from mining the ore are subject to confiscation by the government, while in country B, there is no such risk. How does the risk of expropriation affect the economic endowments of the two nations? In which nation are people richer, and why?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Consider two countries, A and B, and suppose that both have identical physical endowments of, say, iron ore. But in country A, any profits that are made from mining the ore are subject to confiscation by the government, while in country B, there is no such risk. How does the risk of expropriation affect the economic endowments of the two nations? In which nation are people richer, and why?
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