Is economic diversification desirable for a resource rich country? Our knowledge on this issue is at best partial. This paper revisits the literature on diversification in resource rich states. It ...maps the history of diversification, identifies gaps in the literature and documents some trends in the data. In particular, it exposes limitations in the data and catalogues trends in non-oil exports and non-oil private sector employment. It concludes with an agenda for research.
•How desirable is diversification in petroleum rich nations?•History of diversification in resource rich nations.•State of data and knowledge on diversification in petroleum rich states.•Diversification trends in oil rich countries.•An agenda for research.
•Empirical analysis of the effect of natural resources on fiscal decentralization.•Resource discovery has very little effect on revenue decentralization but induces expenditure centralization.•Oil ...discovery the main driver of centralization and not mineral discovery.•Resource discovery leads to centralization in countries without permanent democratization.•Tax and intergovernmental transfers respond most to resource discovery and democratization whereas own source revenue, property tax, educational expenditure, and health expenditure do not seem to be affected.•Higher resource rent leads to more centralization and the effect is moderated by democratization.
If the central government is a revenue maximizing Leviathan then resource discovery and democratization should have discernible impacts on the degree of fiscal decentralization. We systematically explore these effects by exploiting exogenous variation in giant oil and mineral discoveries and permanent democratization. Using a global dataset of 77 countries over the period 1970–2012 we find that resource discovery has very little effect on revenue decentralization but induces expenditure centralization. Oil discovery appears to be the main driver of centralization and not minerals. Resource discovery leads to centralization in locations which have not experienced permanent democratization. Tax and intergovernmental transfers respond most to resource discovery shocks and democratization whereas own source revenue, property tax, educational expenditure, and health expenditure do not seem to be affected. Higher resource rent leads to more centralization and the effect is moderated by democratization.
We hypothesize that natural resource revenues may deteriorate contract enforcement if political institutions are weak. As poor contract enforcement leads to low financial development, resource ...revenues may hinder financial development in countries with poor political institutions, but not in countries with comparatively better political institutions. We provide empirical support for this hypothesis based on within-country variation in our sample covering the period 1970–2005 and 133 countries. Our results are robust to the use of additional control variables, different samples, and alternative measures of financial development and political institutions.
Donor countries have been using international aid in the field of energy for at least three decades. The stated objective of this policy is to reduce emissions and promote sustainable development in ...the global South. In spite of the widespread use of this policy tool, very little is known about its effect on emissions. In this paper we perform an empirical audit of the effectiveness of energy‐related aid in tackling CO2 and SO2 emissions. Using a global panel dataset covering 128 countries over the period 1971–2011 and estimating a parsimonious model using the Anderson and Hsiao estimator, we do not find any evidence of a systematic effect of energy‐related aid on emissions. We also find that the non‐effect is not conditional on institutional quality or level of income. Countries located in Europe and Central Asia do better than others in utilizing this aid to reduce CO2 emissions. Our results are robust after controlling for the environmental Kuznets curve, country fixed effects, country‐specific trends, and time‐varying common shocks.
The Australian economy experienced very frequent and sizeable terms of trade shocks. These shocks at times were more pronounced than commodity exporting developing countries and disproportionately ...benefited the extreme top end of income distribution. Did they derail overall economic progress? Circumstantial evidence suggests that they did not, but hard econometric evidence appears to be rare. In this paper, I revisit the Australian resource curse question from a long‐run perspective. Using time series data on commodity prices, real GDP, real wages, non‐farm GDP, manufacturing share of GDP, and manufacturing share of employment covering the period 1900 to 2007, I find very little evidence of a resource curse. Commodity booms in general and positive agricultural price shocks in particular appear to have impacted the rest of the economy positively both in short‐ and long‐run. The positive effect is primarily led by expansion in manufacturing. This is perhaps reflective of trade protection, labour and credit market flexibility, and relatively open skilled migration in Australia especially during the post‐war period.
Abstract
We investigate the effects of giant oil discovery and boom‐bust price cycle on manufacturing using a large dataset of up to 49,481 two‐digit industry‐years across 136 countries over the ...period 1962 to 2012. We find that oil discovery reduces growth in manufacturing value added and wages. The effect on employment is insignificant. We also find strong association between oil discovery and manufacturing slowdown episodes. Oil price boom and bust both negatively affects manufacturing perhaps due to increasing input cost (boom) and declining demand (bust). We do not find any evidence in favour of a real exchange rate appreciation driven effect as outlined in standard Dutch Disease models. We speculate that the effect is primarily driven by an increase in the cost of locally sourced manufacturing input.
The empirical relationship between natural resources and conflict in Africa is not very well understood. Using a novel geocoded data set, we are able to construct a quasi-natural experiment to ...explore the causal effects of oil field and mineral discoveries on intrastate armed conflict in Africa at the grid cell level corresponding to a spatial resolution of 0.5° × 0.5° latitude and longitude. We find no evidence of resource discoveries triggering conflict after controlling for property rights institutions, past discoveries, grid cell and year fixed effects, grid cell–specific trends, and country-year fixed effects. Resource discoveries are associated with improved local living standards and increased political patronage, both of which reduce conflict. We observe little or no heterogeneity in the relationship across resource types, discovery size, distance to discovery and borders, and institutions. The relationship remains unchanged at a higher grid cell resolution and at the regional and national levels.
Democratization and media freedom have been suggested as useful tools in the fight against political corruption, but so far their interplay in this fight has received scant attention. We present a ...game theoretic model which allows for varying quality of media freedom and democratic institutions. The model predicts, among others, that democratization and media freedom are complements in the fight against political corruption. We test our theoretical predictions using differences-in-differences estimations and panel data covering 129 countries from 1980 to 2007. We find evidence of causal effects of democratization and media freedom on corruption, and that the two are complements. Our main results hold after controlling for income, country fixed effects, and continent-specific time-varying shocks.
•Democratization and media freedom are both said to reduce political corruption.•We study theoretically and empirically their interplay in reducing corruption.•The theoretical model predicts complementarity of democracy and media freedom.•Differences-in-differences estimates support our theoretical predictions.
What are the economic consequences of mining in Sub-Saharan Africa? Using a panel of 3,635 districts from 42 Sub-Saharan African countries for the period 1992 to 2012 we investigate the effects of ...mining on living standards (measured by night-lights and household/cohort characteristics from Demographic and Health Surveys) and public service provisions (from Afrobarometer). Night-lights increase in mining districts when mineral production expands (intensive margin), but large effects are mainly associated with new discoveries and new production (extensive margin). We identify the effect by carefully choosing feasible but not yet mined districts as a control group. In addition, we exploit first, single-first, giant and major discoveries as exogenous news shocks. Mines in Africa exhibit enclave characteristics as we find little evidence of significant spillovers to other districts.
•Economic activity measured by nightlights increase with mineral production.•Effects of new discoveries and new production are large.•Mixed evidence on living standards and public service provision.•Enclave nature of mines in Africa is confirmed.
A diversified aid network could improve growth by reducing volatility. Alternatively, it could harm growth by encouraging waste and corruption. In this paper we test the effect of aid diversification ...on growth, growth acceleration, and growth duration. Using a large data set with a maximum of 126 countries over the period 1965–2010 and estimating three types of models (panel vector auto regression, binary dependent variable, and duration), we find the following. First, a diversified aid network Granger causes growth. Second, the “growth acceleration episodes” identified following the definition of Hausmann et al. (Journal of Economic Growth, 2005, 10, 303–329) do not seem to be affected by aid diversification. Third, the “growth spells” identified using Berg et al.’s definition appear to be prone to premature termination as a result of aid concentration. Our results appear to be robust to a wide array of tests and alternative measures of aid diversification.
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