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The Non-Monotonic Political Effects of Resource Booms

Author

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  • Stanislao Maldonado

    (Universidad del Rosario)

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.

Suggested Citation

  • Stanislao Maldonado, 2018. "The Non-Monotonic Political Effects of Resource Booms," Working Papers 121, Peruvian Economic Association.
  • Handle: RePEc:apc:wpaper:121
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    More about this item

    Keywords

    Resource booms; political competition; reelection; intergovernmental transfers;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)

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