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Natural Resource Windfalls and Efficiency of Local Government Expenditures: Evidence from Peru

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  • Martin Ardanaz

    ()

  • Stanislao Maldonado

    ()

Abstract

We study the role of natural resource windfalls in explaining the efficiency of public expenditures. Using a rich dataset of expenditures and public good provision for 1,836 municipalities in Peru for period 2001-2010, we estimate a non-monotonic relationship between the efficiency of public good provision and the level of natural resource transfers. Local governments that were extremely favored by the boom of mineral prices were more efficient in using fiscal windfalls whereas those benefited with modest transfers were more inefficient. These results can be explained by the increase in political competition associated with the boom. However, the fact that increases in efficiency were related to reductions in public good provision casts doubts about the beneficial effects of political competition in promoting efficiency.

Suggested Citation

  • Martin Ardanaz & Stanislao Maldonado, 2016. "Natural Resource Windfalls and Efficiency of Local Government Expenditures: Evidence from Peru," DOCUMENTOS DE TRABAJO 014578, UNIVERSIDAD DEL ROSARIO.
  • Handle: RePEc:col:000092:014578
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    Cited by:

    1. Agüero, Jorge M. & Balcázar, Carlos Felipe & Maldonado, Stanislao & Ñopo, Hugo, 2017. "The value of redistribution: natural resources and the formation of human capital under weak institutions," Avances de Investigación 0028, Grupo de Análisis para el Desarrollo (GRADE).
    2. repec:eee:jrpoli:v:54:y:2017:i:c:p:43-52 is not listed on IDEAS

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    Keywords

    Resource booms; intergovernmental transfers; local government efficiency;

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