The Natural Resource Curse, Fiscal Decentralization, and Agglomeration Economies
AbstractNatural resource abundance is a blessing for some countries, yet is a curse for others. The degree of fiscal decentralization may account for this divergent outcome. Resources tend to locate in remote, non-agglomerated, and sparsely populated areas; a high degree of fiscal decentralization gives a resource abundant region an advantage in the inter-regional tax competition over capital so that it attracts some capital from agglomerated and densely populated regions. Given a sufficiently high agglomeration level, any such movement of capital would bring a loss of output in the agglomerated region that outweighs the sum of gains from resource income and increased output in the remote region – so that aggregate product in the economy drops. This theory is empirically tested -and confirmed- building on Sachs and Warner’s influential works on the resource curse, employing the World Bank’s Fiscal Decentralization Indicators, and taking the United States as a case study.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 29664.
Date of creation: Jan 2011
Date of revision:
Natural Resources; Economic Growth; Resource Curse; Fiscal Decentralization; Agglomeration Economies; Tax Competition;
Find related papers by JEL classification:
- O18 - Economic Development, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
- O57 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
- O13 - Economic Development, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
- Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
- C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-03-26 (All new papers)
- NEP-CIS-2011-03-26 (Confederation of Independent States)
- NEP-GEO-2011-03-26 (Economic Geography)
- NEP-PBE-2011-03-26 (Public Economics)
- NEP-URE-2011-03-26 (Urban & Real Estate Economics)
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