The Non-Monotonic Political Effects of Resource Booms

Maldonado, Stanislao (2014): The Non-Monotonic Political Effects of Resource Booms.

Abstract

This study uses variation in natural resource rents and mineral production among Peruvian municipalities to analyze the impact of resource booms on local politicians' behavior and citizens' well-being. Although this topic has recently attracted scholarly interest, existing empirical evidence remains inconclusive regarding whether resource booms are beneficial or detrimental to citizens via their effects on public good provision and living standards. Despite many existing theoretical models allowing for the possibility of non-monotonic responses, empirical literature has largely approached this phenomena using linear models, thus misunderstanding the complex nature of resource booms. By examining recent extraordinary mineral price increases along with particular rules for natural resource rent distribution in Peru, I show that the effects of resource booms on reelection outcomes, political competition, public goods provision, clientelism, and well-being are conditional to the size of the rents in a non-monotonic fashion. These results are robust to endogenous production responses and are consistent with recent theoretical scholarship for resource rich economies.

• Item Type: MPRA Paper
• Language: English
• Keywords: Resource booms, political competition, reelection, intergovernmental transfers.
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O13 - Agriculture ; Natural Resources ; Energy ; Environment ; Other Primary Products; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q58 - Government Policy; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R5 - Regional Government Analysis > R51 - Finance in Urban and Rural Economies

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