Sovereign wealth funds pull $90bn from asset managers

Article in the FT:

State-backed investment vehicles grapple with low commodity prices and disappointing returns.

Read on here.

New OxCarre research: Saving Alberta's Resource Revenues: Role of intergenerational and liquidity funds

New OxCarre research from:

Ton van der Bremer (University of Edinburgh) and Rick van der Ploeg (OxCarre)

Saving Alberta's Resource Revenues: Role of intergenerational and liquidity funds

Abstract:

We use a welfare-based intertemporal stochastic optimization model and historical data to estimate the size of the optimal intergenerational and liquidity funds and the corresponding resource dividend available to the government of the Canadian province Alberta. To first-order of approximation, this dividend should be a constant fraction of total above- and below-ground wealth, complemented by additional precautionary savings at initial times to build up a small liquidity fund to cope with oil price volatility. The ongoing dividend equals approximately 30 per cent of government revenue and requires building assets of approximately 40 per cent of GDP in 2030, 100 per cent of GDP in 2050 and 165 per cent in 2100. Finally, the effect of the recent plunge in oil prices on our estimates is examined. Our recommendations are in stark contrast with historical and current government policy.

Mining matters: Natural resource extraction and local business constraints

Research on VOXEU from

Ralph de Haas (EBRD) and Steven Poelhekke (VU Amsterdam):

Mining matters: Natural resource extraction and local business constraints

Summary:
The extraordinary expansion in global mining activity over the last two decades, and its increasing concentration in emerging markets, has reignited the debate over the impact of mining on local economic activity. This column analyses how the presence of nearby mines influences firms in eight countries with large manufacturing and mining sectors. Mines are found to out-compete local manufacturing firms for inputs, labour, and infrastructure. However, mining activity is found to improve the business environment on a wider geographic scale.

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].