New research: poor institutions, rich mines: resource curse in the origins of the Sicilian mafia

Paolo Buonanno (Univerisity of Bologna), Ruben Durante [rubendurante.net] (Science Po), Giovanni Prarolo [google.com] (University of Bologna) and Paolo Vanin [unibo.it] (University of Bologna) write on

Poor institutions, rich mines: resource curse in the origins of the Sicilian mafia

Abstract:
With weak law-enforcement institutions, a positive shock to the value of natural resources may increase demand for private protection and opportunities for rent appropriation through extortion, favouring the emergence of mafia-type organisations. We test this hypothesis by investigating the emergence of the mafia in twentieth century Sicily, where a severe lack of state property-rights enforcement coincided with a steep rise in international demand for sulphur, Sicily's most valuable export commodity. Using historical data on the early incidence of mafia activity and on the distribution of sulphur reserves, we document that the mafia was more present in municipalities with greater sulphur availability.
Published in the Economic Journal, available here

New Research: Resource Shocks and Human Capital Stocks - Brain Drain or Brain Gain?

A new research paper from Daniel Steinberg (uni-tuebingen.de), University of Tübingen,

Resource Shocks and Human Capital Stocks - Brain Drain or Brain Gain?

Abstract:

Based on the paradox of plenty, resource abundant countries tend to be vulnerable for lower economic prosperity along with instable political institutions as well as corruption. This paper sheds light on the relationship between resource abundance and the selectivity of migration. First, we combine a Dutch-Disease-Model with a Roy-Borjas-Model in order to elaborate on the relationship between resource shocks and migrant selectivity theoretically. Thereby, we predict that resource booms give rise to brain drain effects which are mediated through income inequality effects. Second, we provide empirical evidence for the effect of resource shocks on migrant selectivity based on a structural equation model in order to disentangle effects on income inequality and migrant selectivity. Our results show that resource shocks, especially oil booms, strengthen brain drain effects in a sample with 113 countries between 1910-2009.

Available here [ehes.org]

New Research: Sovereignty, the ‘resource curse’ and the limits of good governance: a political economy of oil in Ghana

Jon Phillips [kcl.ac.uk], Elena Hailwood and Andrew Brooks [kcl.ac.uk], all King's College London

write on

Sovereignty, the ‘resource curse’ and the limits of good governance: a political economy of oil in Ghana

Abstract:

The idea of a resource curse has influenced policy makers and led to calls for good governance to avoid the pitfalls of oil sector development. Through discussion of Ghana’s recent insertion into the global political economy of oil, this paper describes the limits of the resource curse framing and associated liberal institutional management approaches to the inherently political nature of oil exploration and production. The paper describes ways in which sovereignty has been exercised both in opposition to and in support of foreign capital, and the role of discourses of ‘good governance’ in structuring the material politics of resource access.

Published in Review of African Political Economy, available here [tandfonline.com].

New Research: Oil, Volatility and Institutions: Cross-Country Evidence from Major Oil Producers

Amany El-Anshasy [uaeu.ac.ae] (UAE University) , Kamiar Mohaddesby [cam.ac.uk] (Cambridge University), and Jeffrey B. Nugent [usc.edu] (University of Southern California), write on

Oil, Volatility and Institutions: Cross-Country Evidence from Major Oil Producers

Abstract:

This paper examines the long-run effects of oil revenue and its volatility on economic growth as well as the role of institutions in this relationship. We collect annual and monthly data on a sample of 17 major oil producers over the period 1961ó 2013, and use the standard panel autoregressive distributed lag (ARDL) approach as well as its cross-sectionally augmented version (CS-ARDL) for estimation. Therefore, in contrast to the earlier literature on the resource curse, we take into account all three key features of the panel: dynamics, heterogeneity and cross-sectional dependence. Our results suggest that (i) there is a significant negative effect of oil revenue volatility on output growth, (ii) higher growth rate of oil revenue significantly raises economic growth, and (iii) better fiscal policy (institutions) can offset some of the negative effects of oil revenue volatility. We therefore argue that volatility in oil revenues combined with poor governmental responses to this volatility drives the resource curse paradox, not the abundance of oil revenues as such.

Available as working paper here [pdf, cam.ac.uk] 

New Research: Economics of modern energy boomtowns: do oil and gas shocks differ from shocks in the rest of the economy?

Alexandra Tsvetkova [ideas.repec.org] and Mark Partridge [osu.edu], both from Ohio State University, write on

Economics of modern energy boomtowns: do oil and gas shocks differ from shocks in the rest of the economy?

abstract:

The U.S. shale boom has intensified interest in how the expanding oil and gas sector affects local economic performance. Research has produced mixed results and has not compared how energy shocks differ from equal-sized shocks elsewhere in the economy. What emerges is that the estimated impacts of energy development vary by region, empirical methodology, as well as the time horizon that is considered. This paper captures these dimensions to present a more complete picture of energy boomtowns. Utilizing U.S. county data, we estimate the effects of changes in oil and gas extraction employment on total employment growth as well as growth by sector. We compare this to the effects of equal-sized shocks in the rest of the economy to assess whether energy booms are inherently different. The analysis is performed separately for nonmetropolitan and metropolitan counties using instrumental variables. We difference over 1-, 3-, 6-, and 10- year time periods to account for county fixed effects and to assess responses across different time horizons. The results show that in nonmetro counties, energy sector multiplier effects on total county employment first increase up to 6-year horizons and then decline for 10-year horizons. In metro counties, 1-year differences analysis suggests crowding out though the multipliers are insignificant in longer horizons. We also observe positive spillovers to the nontraded goods sector, while spillovers are small or negative for traded goods. Yet, equal-sized shocks in the rest of the economy produce more jobs on average than oil and gas shocks, suggesting that policymakers should seek more diversified development.

Paper available here [pdf, uni-muenchen.de] 

New Research: The Resource Curse Revisited

The Chatham House group on natural resources and conflict has released a new paper titled,

"The Resource Curse Revisited", available here, see also the comment on the FT, authored by Paul Stevens, Glada Lahn, and Jaakko Kooroshy.

The paper takes stock of the achievements of the 'extractives-led development agenda', where it has failed and how it should adapt to a new environment that is increasingly concerned with carbon intensity of fossil fuels and the emerging world of low commodity prices.

What I find interesting is the explicit question of the use of extra fast extraction of natural resources, and whether the option of leaving things 'under ground' may make actually more sense. A view not very often expressed indeed.

FT's Nick Butler: The reports are false – coal burns on

Nick Butler writes on the FT website and interesting note on the future of coal.

Writing on the headlines and recent divestment campaigns,

If you have Oxford University, Michael Bloomberg and the Norwegian Sovereign Wealth Fund against you what hope can there be?

May I note an OxCARRE paper [ox.ac.uk] by Tony Venables and Paul Collier? In fact, he notes, how dominant coal still is, and likely to remain given the dependence of it in China and India.

He concludes that only a cheap renewable energy would be able to displace coal. That would imply serious energy put into science and research. Closing,

In the meantime, it would be prudent to start some serious consideration of the question of adaptation to the changes in climate that begin to look inevitable.