Thursday, April 30, 2015

VoxEU: Commodity prices: Over a hundred years of booms and busts

At VoxEU, Andrew Powell [] writes about

Commodity prices: Over a hundred years of booms and busts
Commodity prices are very persistent. A boom is always followed by a bust, and after a slump, a boom comes along. This column reviews some basic aspects of commodity theory and their role in the last boom. Finally, it presents arguments stating that lower commodity prices are here to stay for a while. We may have to wait many years for the next boom to come along.
 Read here []

Wednesday, April 29, 2015

New Research: Resource curse and public spending on health and education

Two researchers from Belgium have studied in more detail the effect of natural resource windfalls on public spending, education in one paper, public health in another.

Nathalie Francken [] (University of Antwerps) and
Lara Cockx (LICOS, Catholic University Leuven)

Extending the concept of the resource curse: Natural resources and public spending on health

This paper extends the concept of the resource curse by studying whether and through which transmission channels natural resource wealth affects social spending. Even though the availability of vast natural capital reserves has commonly been linked to the neglect of human development, most of the literature has continued to focus on economic performance. This paper is the first to empirically investigate the link between natural resource wealth and public health expenditures in light of the hypothesis that resource wealth as a source of unearned state income enhances state autonomy and increases volatility, which leads to policies that fail to prioritize human development. Using a large panel dataset of world countries covering the period from 1995 to 2009, we find a robust, significant inverse relationship between natural resource dependence, and even abundance, and public health spending over time. The effect remains significant after controlling for state autonomy, volatility, and other factors. These findings have implications for national authorities as well as the extractive industry. Governments should be made accountable for natural resource wealth and correct taxation could provide additional resources, earmarked for health. The extractive industry could increase their investments in sustainable Corporate Social Responsibility operations, specifically in the health sector.
Published in 2014 in Ecological Economics []

And a new paper,

Is there a Natural Resource Curse on Education Spending?

This paper contributes to a new line of research in the resource curse literature that addresses the link between resource wealth and fiscal policy by empirically investigating the relationship between natural resource dependence and public education spending. Using a large panel dataset of world countries covering the period from 1995 to 2009, we find robust evidence of a public education spending resource curse. The adverse effect of natural resource dependence on public education expenditures relative to GDP remains significant after controlling for additional covariates such as income, aid, and the age structure of the population. Our results further confirm the existence of indirect effects of resource dependence through a deterioration of government account- ability and the crowding-out of more skilled-labour intensive sectors in the economy. Furthermore, our findings indicate that the resource curse effect on the government prioritization of education mainly stems from point-source natural resources. Our results have important implications for managing natural resource wealth in developing countries, as they could achieve particularly high returns by investing resource revenues in public goods such as education. While this paper underlines the importance of institutions and government accountability, our results also raise questions on the role of the extractives industry. The oil, gas and mining industry should consider increasing funding for education through Corporate Social Responsibility initiatives in this sector or through other innovative channels of development finance.
Available as working paper here []

Tuesday, April 28, 2015

OxCARRE Seminars this term

This week the new term starts, and OxCARRE is hosting the following seminars:

Wednesday 13 May 
(joint with The Smith School of Enterprise & the Environment)
Venue: Gottmann Room, OUCE, South Parks Road
Speaker: Christophe McGlade [] (UCL)
Title: How Much Fossil Fuel to Leave Unburnt to Limit Global Warming to 2 Degrees Celsius

Tuesday 19 May (14h30, Seminar Room C)
Speaker: Tiago Cavalcanti [] (University of Cambridge)
Title: Winning the Oil Lottery: The Impact of Natural Resource Extraction on Growth

Tuesday 2 June (14h30, Seminar Room C)
Speaker: Ryan Kellogg [] (University of Michigan)
Title: Hotelling Under Pressure
(this paper has featured earlier at this blog, here)

See also the OxCARRE website []

Our Brown Bag series (Wednesday 12h00 – Seminar Room D) has

29 April
Speaker: Gerhard Toews
Title: Dutch Disease Mechanisms: Evidence from the Construction Sector in Russia

13 May
Speaker: Thomas McGregor

27 May
Speaker: Wessel Vermeulen []
Title: The impact of windfalls in a small open economy with heterogeneous firms

10 June
Speaker Qi Zhang

17 June
Speaker: Michael Koelle

Monday, April 27, 2015

New Research: The Local Impact of Mining on Poverty and Inequality: Evidence from the Commodity Boom in Peru

Norman Loayza [] (World Bank) Jamele Rigolini [] (IZA) write on

The Local Impact of Mining on Poverty and Inequality: Evidence from the Commodity Boom in Peru
This paper studies the impact of mining activity on socioeconomic outcomes in local communities in Peru. In the last two decades, the value of Peruvian mining exports has grown by fifteen times; and since a decade ago, one-half of fiscal revenues from mining have been devolved to local governments in producing regions. Has this boom benefitted people in local communities? We find evidence that producing districts have larger consumption per capita and lower poverty rates than otherwise similar districts. However, these positive impacts decrease drastically with administrative and geographic distance from mining centers. Moreover, consumption inequality within producing districts is higher than in comparable nonproducing districts. This dual effect of mining is partially accounted for by the better educated immigrants required and attracted by mining activity. The inequalizing impact of mining, both across and within districts, may explain the social discontent with mining in Peru, despite its enormous revenues.
Full paper here []

Which adds to the stock of papers on local impact and resource extraction, reviewed in a paper discussed last week []. See also the meta-analysis on mining and poverty, discussed here [].

Friday, April 24, 2015

Sovereign investor models. A new report.

From the Harvard Kennedy School and Center for International Development at Harvard University, a new report has coming out by Khalid A. Alsweilem (The Belfer Center for Science and International Affairs Harvard Kennedy School), Angela Cummine (British Academy Post-doctoral Fellow University of Oxford), Malan Rietveld (Investec Investment Institute & The Center for International Development Harvard Kennedy School) and Katherine Tweedie (Investec Investment Institute).

Sovereign investor models: Institutions and policies for managing sovereign wealth
The primary aim of the report is to identify the leading practices among existing funds and establish an analytical framework for assessing the critical policy and institutional aspects that legislators, policymakers and practitioners need to consider in establishing a new SWF or reforming an existing one.
The authors credit the academic research and experts they've used to write report, which includes work from people at OxCARRE. 

Thursday, April 23, 2015

New OxCARRE Review Paper: The Local Economic Impacts of Natural Resource Extraction

OxCARRE affiliates Jim Cust [] (Oxford) and Steven Poelhekke [] (VU Amsterdam) offer a review paper on

The Local Economic Impacts of Natural Resource Extraction

Whether it is fair to characterize natural resource wealth as a curse is still debated. Most of the evidence derives from cross-country analyses, providing cases both for and against a potential resource curse. Scholars are increasingly turning to within-country evidence to deepen our understanding of the potential drivers, and outcomes, of resource wealth effects. Moving away from cross-country studies offers new perspectives on the resource curse debate, and can help overcome concerns regarding endogeneity. Therefore, scholars are leveraging datasets which provide greater disaggregation of economic responses and exogenous identification of impacts.

This paper surveys the literature on these studies of local and regional effects of natural resource extraction. We discuss data availability and quality, recent advances in methodological tools, and summarize the main findings of several areas of research. These include the direct impact of natural resource production on local labor markets and welfare, the effects of government spending channels resulting from mining revenue, and regional spillovers. Finally, we take stock of the state of the literature and provide suggestions for future research.
Full paper here [], at the OxCARRE Research Paper series [].

Monday, April 13, 2015

NRGI: "Why Sovereign Wealth Funds Should Not Invest at Home"

Over at NRGI an interesting post from Andrew Bauer [] on the allocation of SWF funds for investing abroad or at home.
SWFs, as savings mechanisms for macroeconomic management, should not be the vehicles of such direct spending. If there is under-investment in the domestic economy, a far better way to remedy the situation is to enact fiscal rules that allocate resource revenues more appropriately between the budget and a SWF.
This reminds me to our experience during the Workshop in Azerbaijan [], where its Fund SOFAZ is allocated the duty to spend and invest on projects that one typically would find in the government budget.

Read on here [], or here [].

Wednesday, April 1, 2015

New Research: Economic Freedom and Productivity Growth in Resource-rich Economies

A new paper by Minoo Farhadi [], Md. Rabiul Islam [], Solmaz Moslehi from Monash [] and Deakin Universities, Australia
published in World Development

Economic Freedom and Productivity Growth in Resource-rich Economies

The focus of this paper is to test whether free market institutions that protect property rights and support freedom of choice and voluntary exchange can change the curse of natural resources into a blessing. To examine the above question, this paper uses the Fraser Institute’s economic freedom index and its five sub-indices, namely government size, property rights, access to sound money, freedom to trade, and setting proper regulations. Using data from 99 sample countries over the period 1970–2010, the system GMM estimates suggest that the negative growth effects of resource rents may turn positive in countries with greater economic freedom.