The company that systematically corrupted the global oil industry

Fairfax Media and The Huffington Post publish a 3-part investigative story on corruption on global scale. The first part deals with a Monaco based corporate fixer of contracts for western companies in the Arab world, the second on the caspian region.

A massive leak of confidential documents has for the first time exposed the true extent of corruption within the oil industry, implicating dozens of leading companies, bureaucrats and politicians in a sophisticated global web of bribery and graft.

Read on here and here [theage.com.au] and follow links under the articles for more details.

New Research: Election cycles in natural resource rents: Empirical evidence

Jeroen Klomp ([sites.google.com] University of Wageningen) Jakob de Haan ([rug.nl] University of Groningen) write on

Election cycles in natural resource rents: Empirical evidence

Abstract

We examine whether governments’ natural resource rents are affected by upcoming elections and if so, whether the incumbent uses these additional rents for re-election purposes. Estimates of a dynamic panel model for about 60 countries for 1975-2011 suggest that elections increase natural resource rents. The incumbent uses these rents for expanding public spending and reducing taxes before elections. However, these electoral cycle effects are statistically significant only in young democracies. Our results also suggest that election effects are stronger in countries with limited access to free media, limited political checks and balances, and a presidential system.

Forthcoming in Journal of Development Economics, available here [sciencedirect.com]

New Research: On the timing of political regime changes in resource-dependent economies

New research from Raouf Boucekkine ([greqam.fr] University of Aix-Marsaille) , Fabien Prieur ([tse-fr.eu], Toulouse School of Economics), Klarizze Puzon (Aix-Marseille School of Economics)

On the timing of political regime changes in resource-dependent economies

Abstract

We consider a resource-dependent economy initially ruled by the elite. The transition from the autocratic to a more democratic regime takes place only if the citizens decide to revolt against the elite. The occurrence of a revolution primarily depends on the autocratic regime vulnerability and the level of inequalities, both being driven by the elite's redistribution and repression policies. First, we show that when a political transition is inevitable, the elite choose the maximum rate of redistribution to lengthen their period in office. Second, we find that the duration of the autocratic regime is linked to resource abundance, and how it relates to the elite's policies. More resources lead to a shorter reign of a redistributive regime, which may not be the case of a repressive regime. Finally, we interpret the Arab spring sequence in light of our findings.

Forthcoming in European Economic Review, Available here [sciencedirect.com].

Immigration Policy, Internal Migration and Natural Resource Shocks

A report by Michel Beine, ([michelbeine.be], University of Luxembourg), Robin Boadway, ([queensu.ca], Queen's University, Canada), and Serge Coulombe ([uottawa.ca], University of Ottawa, Canada) for the C.D. Howe institute [cdhowe.org] in Canada,

Moving Parts: Immigration Policy, Internal Migration and Natural Resource Shocks

Recent changes to Canadian immigration policy, including the Temporary Foreign Worker (TFW) Program, are positive overall, but they could have negative consequences that need addressing, according to a new C.D. Howe Institute report. In “Moving Parts: Immigration Policy, Internal Migration and Natural Resource Shocks,” authors Michel Beine, Robin W. Boadway and Serge Coulombe note that changes to the TFW Program have limited the kinds of workers companies can bring in, made the applications more rigorous, and set an employer-specific cap on the use of TFWs.

Report available here [cdhowe.org], and is partly based on earlier research by the two of the authors and yours truly on the effect of migration and resources in Canada, published recently in Economic Journal (here, [wiley.com])

New Research: Do Resource-Rich Countries Suffer from a Lack of Fiscal Discipline?

Michael Bleaney [University of Nottingham] and Håvard Halland [World Bank] write on

Do Resource-Rich Countries Suffer from a Lack of Fiscal Discipline?

Abstract:

Fiscal indicators for resource-rich and resource-poor lowand middle-income countries are compared using annual data from 1996 to 2012. Resource richness is defined by export composition: fuel greater than a 25 percent share and/or ores and metals greater than a 10 percent share. Fuel exporters have a significantly better general government fiscal balance than the rest of the sample, and higher revenues and expenditures, which are approximately evenly split between extra consumption expenditure and extra capital expenditure. Only about a quarter of their extra revenue goes into extra consumption expenditure, and this proportion has been lower since 2005. Fuel exporters’ expenditure reacts with a lag to oil price fluctuations. There are no significant differences between ores and metals exporters and resource-poor countries, or between new and old resource exporters, in aggregate expenditures and revenues. Ores and metals exporters spend more on investment and less on government consumption. Some individual country cases are briefly discussed. 

A paper from the World Bank's Governance Global Practice Group, Policy Research Working Paper 7552, available here [pdf, worldbank.org]

New OxCARRE research: Natural Assets: Surfing a wave of economic growth

OxCARRE's Sam Wills and Thomas McGregor write on

Natural Assets: Surfing a wave of economic growth

Abstract

Many natural assets can not be valued at market prices. Non-market valuations typically focus on the value of an individual asset to an individual user, ignoring macroeconomic spillovers. We estimate the contribution of a natural asset to aggregate economic activity by exploiting exogenous variation in the quality of surfing waves around the world, using a global dataset covering over 5,000 locations. Treating night-time light emissions as a proxy for economic activity we find that high quality surfing waves boost activity in the local area (<5km), relative to comparable locations with low quality waves, by 0.15-0.28 log points from 1992-2013. This amounts to between US$ 18-22 million (2011 PPP) per wave per year, or $50 billion globally. The e!ect is most pronounced in emerging economies. Surfing helps reduce extreme rural poverty, by encouraging people to nearby towns. When a wave is discovered by the international community, economic growth in the area rises by around 3%.

Available on the OxCARRE website, here [pdf]

New OxCARRE Research: Using Natural Resources for Development: Why Has It Proven So Difficult?

OxCARRE's Director Tony Venables writes on

Using Natural Resources for Development: Why Has It Proven So Difficult?

Forthcoming in the Journal of Economic Perspectives

Abstract

Developing economies have found it hard to use natural resource wealth to improve their economic performance. Utilising resource endowments is a multi-stage economic and political problem that requires private investment to discover and extract the resource, fiscal regimes to capture revenue, judicious spending and investment decisions, and policies to manage volatility and mitigate adverse impacts on the rest of the economy. Experience is mixed, with some successes (such as Botswana and Malaysia) and more failures. This paper reviews the challenges that are faced in successfully managing resource wealth, the evidence on country performance, and the reasons for disappointing results. 

Available from the OxCARRE website, here [pdf]