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Local Natural Resource Curse?

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  • Lars-Erik Borge
  • Pernille Parmer
  • Ragnar Torvik

Abstract

The large variation in revenues among Norwegian local governments can partly be explained by revenues collected from hydropower production. This revenue variation, combined with good data availability, can be used to extend the literature on the resource curse in two directions. First, to ensure that there is no problem of endogeneity in the analysis we obtain a purely exogenous measure of local revenue by instrumenting the variation in hydropower revenue, and thus total revenue, by topology, average precipitation and meters of river in steep terrain. Second, using data for revenue derived from hydropower production in Norwegian local governments we test the ’Rentier State’ hypothesis; that revenue derived from natural resources should harm efficiency more than revenue derived from other sources such as taxation. Although we do ?nd that higher local government revenue reduces the efficiency in production of public goods, we do not ?nd that this effect is stronger for natural resource revenue than for other revenue.

Suggested Citation

  • Lars-Erik Borge & Pernille Parmer & Ragnar Torvik, 2013. "Local Natural Resource Curse?," Working Papers No 5/2013, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
  • Handle: RePEc:bny:wpaper:0014
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    7. Maldonado, Stanislao, 2014. "The Non-Monotonic Political Effects of Resource Booms," MPRA Paper 85649, University Library of Munich, Germany, revised 18 Dec 2017.
    8. Stefan Leknes & Jørgen Modalsli, 2018. "Who benefited from industrialization? The local effects of hydropower technology adoption," Discussion Papers 874, Statistics Norway, Research Department.
    9. Iacono, Roberto, 2016. "No blessing, no curse? On the benefits of being a resource-rich southern region of Italy," Research in Economics, Elsevier, vol. 70(2), pages 346-359.
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    15. Berset, Simon & Schelker, Mark, 2020. "Fiscal windfall curse," European Economic Review, Elsevier, vol. 130(C).
    16. Acar, Sevil & Karahasan, Burhan Can, 2015. "Uncovering Norway’s regional disparities with respect to natural riches," REGION, European Regional Science Association, vol. 2, pages 1-31.
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    21. Diemer, Andreas, 2020. "Spatial diffusion of local economic shocks in social networks: evidence from the US fracking boom," LSE Research Online Documents on Economics 105868, London School of Economics and Political Science, LSE Library.
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    23. Chandan Sharma & Debdatta Pal, 2021. "Revisiting resource curse puzzle: new evidence from heterogeneous panel analysis," Applied Economics, Taylor & Francis Journals, vol. 53(8), pages 897-912, February.
    24. Pernille Parmer, 2014. "Natural Rerources and public Sector Wages," Working Paper Series 16114, Department of Economics, Norwegian University of Science and Technology.

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    More about this item

    Keywords

    resource curse; rentier state; identi?cation; local government; political economy.;
    All these keywords.

    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H27 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other Sources of Revenue
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

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