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Local Natural Resource Curse?

  • Lars-Erik Borge

    ()

    (Department of Economics, Norwegian University of Science and Technology)

  • Pernille Parmer

    ()

    (Department of Economics, Norwegian University of Science and Technology)

  • Ragnar Torvik

    ()

    (Department of Economics, Norwegian University of Science and Technology)

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 re- source 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 pre- cipitation 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 find that higher local government revenue reduces the efficiency in production of public goods, we do not find that this effect is stronger for natural resource revenue than for other revenue.

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File URL: http://www.svt.ntnu.no/iso/WP/2013/11_localcurse_LEB_PP_RT.pdf
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Paper provided by Department of Economics, Norwegian University of Science and Technology in its series Working Paper Series with number 14913.

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Length: 37 pages
Date of creation: 19 Jun 2013
Date of revision:
Handle: RePEc:nst:samfok:14913
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