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Winning the Oil Lottery: The Impact of Natural Resource Extraction on Growth

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  • Mr. Tiago Cavalcanti
  • Daniel Da Mata
  • Mr. Frederik G Toscani

Abstract

This paper provides evidence of the causal impact of oil discoveries on development. Novel data on the drilling of 20,000 oil wells in Brazil allows us to exploit a quasi-experiment: Municipalities where oil was discovered constitute the treatment group, while municipalities with drilling but no discovery are the control group. The results show that oil discoveries significantly increase per capita GDP and urbanization. We find positive spillovers to non-oil sectors, specifically, an increase in services GDP which stems from higher output per worker. The results are consistent with greater local demand for non-tradable services driven by highly paid oil workers.

Suggested Citation

  • Mr. Tiago Cavalcanti & Daniel Da Mata & Mr. Frederik G Toscani, 2016. "Winning the Oil Lottery: The Impact of Natural Resource Extraction on Growth," IMF Working Papers 2016/061, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2016/061
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    More about this item

    Keywords

    WP; oil discovery; oil sector; oil municipality; oil worker; oil service; oil-producing firm; Oil and Gas; Economic Growth; Urbanization; oil deposit; oil MCAS; oil lottery; Oil; Oil production; Natural resources; Services sector; Manufacturing; Global;
    All these keywords.

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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