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The natural Resource Curse, Fiscal Decentralization, and Agglomeration Economies

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  • Fidel Perez-Sebastian
  • Ohad Raveh

Abstract

Natural resource abundance is a blessing for some countries, but a curse for othes. We show that differences across countries in the degree of fiscal decentralisation can contribute to this divergent outcome. First, the paper presents a unified theory that combines political and market mechanisms to illustrate why natural resource booms can create negative effects in fiscally decentralized nations. Thereafter, we employ Sachs and Warner's cross-sectional data, and also construct a new panel-data sample to test the hypothesis. Results support the joint effect of the two variables.

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Bibliographic Info

Paper provided by Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford in its series OxCarre Working Papers with number 112.

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Date of creation: 2013
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Handle: RePEc:oxf:oxcrwp:112

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Keywords: Natural resources; economic growth; fiscal decentralization; agglomeration economies; tax competition;

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