Monday, March 31, 2014

THE IMPACT OF EXTREME WEATHER ON CIVIL CONFLICT

Economic Journal: Droughts in China have historically been more likely to trigger peasant revolts than floods, according to research by Professor Ruixue Jia, published in the March 2014 issue of the Economic Journal. Her study finds that while both kinds of ‘weather shock’ significantly raised the prices of grains (wheat and rice), the price effect of droughts was nearly three times that of floods. The introduction of sweet potatoes, a drought-resistant crop from the Americas, led to a considerable reduction in civil conflict.

Thursday, March 27, 2014

Commodity-Price Comovement and Global Economic Activity

NBER WP: Guided by the predictions of a general-equilibrium macroeconomic model with commodity prices, we apply a new factor-based identification strategy to decompose the historical sources of changes in commodity prices and global economic activity. The model yields a factor structure for commodity prices in which the factors have an economic interpretation: one factor captures the combined contribution of all aggregate shocks that affect commodity markets only through general equilibrium effects while other factors represent direct shocks to commodity markets. The model also provides identification conditions to recover the structural interpretation from a factor decomposition of commodity prices. We apply these methods to a cross-section of real commodity prices since 1968. The theoretical restrictions implied by the model are consistent with the data and thus yield a structural interpretation of the common factors in commodity prices. The analysis indicates that commodity-related shocks have contributed only modestly to global business cycle fluctuations.

Tuesday, March 25, 2014

Dutch Disease and the Oil and Boom and Bust

OxCarre WP by Brock Smith: This paper examines the impact of the oil price boom in the 1970s and the subsequent bust on non-oil economic activity in oil-dependent countries. During the boom, manufacturing value added and exports increased significantly relative to non-oil dependent countries, along with wages, employment and investment. These measures decreased, though to a lesser extent, during the bust, displaying a positive relationship with oil prices. In contrast with the Dutch Disease model, exportable manufacturing sectors grew faster than non-exportable ones. However, exports of non-hydrocarbon natural resources and agricultural products displayed a strongly negative relationship to prices. The results suggest a push towards industrialization induced by the oil revenue windfall.

Saturday, March 22, 2014

The limited economic impact of the US shale gas boom

VoxEU: The US unconventional energy boom has reversed the decline of domestic production, lowered oil and gas imports, reduced gas prices, and created political space for tougher regulations on coal-fired power plants. This column argues that it is not a panacea, however. Even if current estimates prove accurate, the long-run benefits to the US economy will be relatively small. Improving energy efficiency and promoting low-carbon technologies will be just as important as before – especially for the EU, given its more limited known reserves of unconventional oil and gas.

Wednesday, March 19, 2014

Managing Natural Resources: Should we Really Listen to People?

WB: Few would argue against the need for policymakers to listen to people’s views when it comes to the good management of natural resources. Indeed, if there is one thing that has been stressed from the countless global experiences of mismanagement, it is the need to involve citizens in decision-making processes...

Monday, March 17, 2014

Regional Favoritism

QJE: We complement the literature on distributive politics by taking a systematic look at regional favoritism in a large and diverse sample of countries, and by employing a broad measure that captures the aggregate distributive effect of many different policies. In particular, we use satellite data on nighttime light intensity and information about the birthplaces of the countries' political leaders. In our panel of 38,427 subnational regions from 126 countries with yearly observations from 1992 to 2009, we find that subnational regions have more intense nighttime light when being the birth region of the current political leader. We argue that this finding provides evidence for regional favoritism. We explore the dynamics and the geographical extent of regional favoritism, and show that regional favoritism is most prevalent in countries with weak political institutions and poorly educated citizens. Further, foreign aid inflows and oil rents tend to fuel regional favoritism in weakly institutionalized countries, but not elsewhere.

Thursday, March 13, 2014

Natural resources and the spread of HIV/AIDS: curse or blessing?

CSAE WP: This paper answers two questions: “What impact have natural resources had on the spread of the HIV/AIDS epidemic so far?” and “What role can natural resource rents play in order to finance the long-run response to HIV/AIDS?” Using a panel dataset, de Soysa and Gizelis (2013) provided evidence that oil-rich countries are more deeply affected by the HIV epidemic. They concluded that government of resource-rich countries failed to implement effective public policies for dealing with the HIV/AIDS epidemic. In this paper, I show that their results are not robust and are spurious because the dependent variables and explanatory variables considered in their analysis are non-stationary. After correcting for these issues, I find no specific relationship between resource rents and the spread of HIV/AIDS. I conclude by discussing the potential of resources rents for financing the long-term liability brought about by the HIV/AIDS epidemic in sub-Saharan Africa.

Wednesday, March 12, 2014

Is North Korea shopping for oil in Libya?

FP: The bizarre tale of the North Korean-flagged oil tanker that has been trying to escape the clutches of Libya's fragile central government has prompted days of conflicting news coverage, precipitated the fall of the country's prime minister, and underscored the continued threat posed by its patchwork of heavily armed militias. But the tangled saga also raises a more basic question: Why on earth would a North Korean-flagged ship risk being bombed "into scrap," as one official threatened, in order to load up on Libyan crude?

Monday, March 10, 2014

Beyond Dutch disease

Economics of Transition: How does the deterioration of rule of law in Russia in recent years affect its ability to move away from an export pattern dominated by natural resources? We investigate this question using three datasets for Russia's bilateral trade relations for goods, services and investment at disaggregated level with its partner countries over the world. Our empirical analysis shows that the deterioration of the rule of law in Russia since 2003 has affected the long-run trade performance of Russia in sophisticated and technology-intensive manufactured goods, as well as its inward investments with advanced economies. It is precisely this type of trade that Russia should nurture to diversify away from hydrocarbons export dependence. Our statistical analysis also shows that Russia remains to a large extent an outlier within the multilateral trading system. It exports disproportionately less to partner countries which are or had become members of the WTO over our period of analysis. Russia's trade appears to have been negatively affected by the accession of these countries to the WTO. Russia itself finally acceded to the WTO in July 2012 amidst signs of a modest improvement of its rule-of-law indicators.

Thursday, March 6, 2014

Aid and oil

Finance and development: Growing numbers of large oil discoveries in low-income countries could reduce the need for aid

Monday, March 3, 2014

Laws and Codes for the Resource Curse

Collier: The international community assigns a high priority to helping impoverished societies, yet its efforts are currently lopsided. While it spends around U.S. $ 100 billion on aid and provides over 100,000 UN peacekeepers, to date it has largely neglected the potential of international codes and laws to raise standards of economic governance. This Essay analyzes the potential contribution of such codes and laws to increase the development impact of natural resource revenues. The current commodity booms make this a critical opportunity for assistance. This Essay reviews the evidence on the resource curse and its causes, including a prognosis for the long term consequences of the present commodity booms, concluding that where behavior patterns to stay unaltered the present booms would be a missed opportunity of quite staggering proportions. The Essay then anatomizes the decision process by hich valuable natural resources in the territory of the society are harnessed for economic growth that benefits the society, delineating five key decisions and considering, for each, whether past failures were predominantly due to mistakes or to misaligned incentives. Next, the Essay turns to the scope for new international voluntary codes and discusses the potential need for new laws, the national promulgation of which would be coordinated across the OECD analogous to anti-bribery legislation. Such laws are difficult to introduce and so are a last-resort approach for the realignment of incentives.