New OxCarre research: Resource discoveries and FDI bonanzas

New OxCarre research from:

Gerhard Toews (OxCarre) and Pierre-Louis Vezina (King's College London)

Resource discoveries and FDI bonanzas

Abstract:

This paper examines the effect of giant oil and gas discoveries on foreign direct

investment in developing economies using a new project-level dataset. We document

a large increase in non-extraction FDI in the 2 years following a giant discovery, an

event which is unpredictable due to the uncertain nature of exploration. We find

that FDI inows increase by 73% and that this wave is driven by a 37% increase

in the number of FDI projects as well as a 22% increases in source countries and

a 17% increase in target sectors. We interpret this FDI response as evidence for the

news-driven business-cycle hypothesis within a developing country setting and highlight

FDI bonanzas as an important development channel for resource rich economies.

Mongolia: Living from loan to loan

Article in the FT:

Since the commodities boom turned to bust, the country has traded self-sufficiency for indebtedness.

Read on here.

Poverty Maps and Darkness

From the updated OxCARRE paper [pdf, oxcarre.ox.ac.uk], Left in the Dark of Brock Smith [brockdsmith.com] and Sam Wills [wordpress.com] come these interesting maps on rural poverty.

Read on at Sam's website [wordpress.com]

New Research: Labor market dynamics and the unconventional natural gas boom: Evidence from the Marcellus region

Timothy M. Komarek ([sites.google.com], Old Dominion University) writes on

Labor market dynamics and the unconventional natural gas boom: Evidence from the Marcellus region

Abstract

The energy extraction boom of the mid 2000s impacted local economies in areas with substantial shale oil and gas reserves. I examine the impact of the energy boom on the labor market by exploiting a natural experiment in the Marcellus region. In particular, I compare counties with fracking activity in Pennsylvania, Ohio and West Virginia to the control group of counties in New York, which imposed a moratorium and later ban on fracking. I look at how the benefits to the labor demand shock are shared between industries as well as how employment and wages in related industries adjust over the course of the resource boom. The results suggest total employment and wages per job increase by 7% and 11% respectively above pre-boom levels in the three years after the boom, but decline after 4 years or more. The results also show significant positive spillovers to related sectors, such as construction, transportation, retail trade and accommodations. However, there is no evidence of the so called ‘resource curse’ crowding out employment or increasing wages in manufacturing.

Published in Resource and Energy Economics, Volume 45, August 2016, Pages 1–17, available here [sciencedirect.com].

New research: Resource revenue management and wealth neutrality in Norway

Klaus Mohn ([uis.no], University of Stavanger) writes on

Resource revenue management and wealth neutrality in Norway

Abstract:

An important idea behind the Norwegian oil fund mechanism and the fiscal spending rule is to protect the non-oil economy from the adverse effects of excessive spending of resource revenues over the Government budget. A critical assumption in this respect is that public sector saving is not being offset by private sector dissaving, which is at stake with the hypothesis of Ricardian equivalence. Based on a framework of co-integrating saving rates, this model provides an empirical test of the Ricardian equivalence hypothesis on Norwegian time series data. Although the model rejects the strong-form presence of Ricardian equivalence, results indicate that the Norwegian approach does not fully succeed in separating spending of resource revenues from the accrual of the same revenues.

Published in Energy Policy, Volume 96, September 2016, Pages 446–457, find here [sciencedirect.com]

FT: Big Oil: From black to green

From the FT: Big Oil: From black to green

Despite pressure to develop renewables, many energy majors see more money in traditional markets

Highlighting the different attempts of big oil companies to diversify to green energy, with a distinct difference apparently between European and US companies.

Read on here

New OxCARRE Research: Stranded assets, the social cost of carbon, and directed technical change: Macroeconomic dynamics of optimal climate policy

New OxCARRE research from

Frederick van der Ploeg ([ox.ac.uk], OxCARRE) and Armon Rezai ([wu.ac.at], WU - Vienna University of Economics and Business)

Stranded assets, the social cost of carbon, and directed technical change: Macroeconomic dynamics of optimal climate policy

Abstract

The tractable general equilibrium model developed by Golosov et al. (2014), GHKT for short, is modified to allow for stock-dependent fossil fuel extraction costs and partial exhaustion of fossil fuel reserves, a negative impact of global warming on growth, mean reversion in climate damages, steady labour-augmenting technical progress, specific green technical progress driven by learning by doing, population growth, and a direct effect of the stock of atmospheric carbon on instantaneous welfare. We characterize the social optimum and derive simple rule for both the optimal carbon tax and the renewable energy subsidy, and characterize the optimal amount of untapped fossil fuel.

Available here [ox.ac.uk].