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: Boom Goes The Price: Giant resource discoveries and real exchange rate appreciation

Gerhard Toews ([sites.google.com] OxCARRE, University of Oxford) and OxCARRE alumni Torfinn Harding ([sites.google.com] NHH Norwegian School of Economics) and Radek Stefanski ([weebly.com] University of St Andrews) write on

Boom Goes The Price: Giant resource discoveries and real exchange rate appreciation

Abstract:

We estimate the effect of giant oil and gas discoveries on bilateral real exchange rates. The size and plausibly exogenous timing of such discoveries make them ideal for identifying the effects of an anticipated resource boom on prices. We find that a giant discovery with the value of a country’s GDP increases the real exchange rate by 14% within 10 years following the discovery. The appreciation is nearly exclusively driven by an appreciation of the prices of non-tradable goods. We show that these empirical results are qualitatively and quantitatively in line with a calibrated model with forward looking behaviour and Dutch disease dynamics.

Full paper available here. [oxcarre.ox.ac.uk]

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 OxCARRE research. New discussion papers from January

January has seen some new discussion papers submitted to the OxCARRE website.

Intergenerational Inequality Aversion, Growth and the Role of Damages: Occam's rule for the global carbon tax by Armon Rezai & Rick van der Ploeg


The Relationship Between Oil Price and Costs in the Oil and Gas Industry by Gerhard Toews & Alexander Naumov


News Shocks in Open Economies: Evidence from Giant Oil Discoveries by Rabah Arezki, Valerie A Ramey & Liugang Sheng


Seven Principles for Managing Resource Wealth by Sam Wills.


and finally a forthcoming paper

Dutch Disease and the Mitigation Effect of Migration: Evidence from Canadian Provinces, by Michel Beine, Serge Coulombe & Wessel Vermeulen

OxCARRE Seminar: Thorvaldor Gylfason - The Dutch disease in reverse. Iceland's natural experiment

Today presenting at OxCARRE: Thorvaldor Gylfason (University of Iceland)

The Dutch disease in reverse: Iceland's natural experiment.

Abstract

Abundant natural resources brought Iceland a systemically overvalued currency, with adverse effects on the secondary tradable sector. During 2003-2008 another national treasure, the sovereign’s AAA rating, was used to attract foreign capital, elevating the real exchange rate even further. The financial collapse in 2008 left the country with a large foreign debt without the possibility of rollovers in international capital markets. This offset some of the effect of the natural resources on the real exchange rate; in effect, this was the Dutch disease in reverse as witnessed, in particular, by a massive increase in the number of tourists in recent years.