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.

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]

New research: Natural Resource Booms in the Modern Era: Is the curse still alive?

Andrew Warner, IMF, writes on

Natural Resource Booms in the Modern Era: Is the curse still alive?

Abstract

The global boom in hydrocarbon, metal and mineral prices since the year 2000 created huge economic rents - rents which, once invested, were widely expected to promote productivity growth in other parts of the booming economies, creating a lasting legacy of the boom years. This paper asks whether this has happened. To properly address this question the empirical strategy must look behind the veil of the booming sector because that, by definition, will boom in a boom. So the paper considers new data on GDP per person outside of the resource sector. Despite having vast sums to invest, GDP growth per-capita outside of the booming sectors appears on average to have been no faster during the boom years than before. The paper finds no country in which (non-resource) growth per-person has been statistically significantly higher during the boom years. In some Gulf states, oil rents have financed a migration-facilitated economic expansion with small or negative productivity gains. Overall, there is little evidence the booms have left behind the anticipated productivity transformation in the domestic economies. It appears that current policies are, overall, prooving insufficient to spur lasting development outside resource intensive sectors. 

Full paper here [pdf, img.org]

It has a hint of a paper by former OxCARRE Researcher Alexander James [alexandergjames.weebly.com], "The Resource Curse: A Statistical Mirage" (Forthcoming, Journal of Development Economics) View

New Research: The Resource Curse Revisited

The Chatham House group on natural resources and conflict has released a new paper titled,

"The Resource Curse Revisited", available here, see also the comment on the FT, authored by Paul Stevens, Glada Lahn, and Jaakko Kooroshy.

The paper takes stock of the achievements of the 'extractives-led development agenda', where it has failed and how it should adapt to a new environment that is increasingly concerned with carbon intensity of fossil fuels and the emerging world of low commodity prices.

What I find interesting is the explicit question of the use of extra fast extraction of natural resources, and whether the option of leaving things 'under ground' may make actually more sense. A view not very often expressed indeed.

the cradle of mankind, oil, water, conflict and development all in Kenya.

The economist [economist.com] has an interesting piece on the northern region in Kenya called Turkana. Called the cradle of life for its findings of ancient human artefacts, it currently goes through significant changes with hick-up oil development, challenging water resources and local and international conflict risks. 

OxCARRE Seminar: Winning the Oil Lottery: The Impact of Natural Resource Extraction on Growth

Today we have Tiago Cavalcanti [sites.google.com] presenting his paper with Daniel Da Mata [sites.google.com] and Frederik Toscani [cam.ac.uk] on

Winning the Oil Lottery: The Impact of Natural Resource Extraction on Growth

Abstract:

This paper provides evidence on the causal impact of oil discoveries on local development. Novel data on the drilling of 20,000 oil wells in Brazil allows us to exploit a quasi-experiment: municipalities where oil was discovered constitute the treatment group while municipalities with drilling but no discovery are the control group. The results show that oil discoveries significantly increase per capita GDP and urbanization. We find positive spillovers to non-oil sectors, specifically an increase in services GDP which stems from higher labor productivity. The results are consistent with greater local demand for non-tradable services driven by highly paid oil workers.

Available here [google.com]

FT Special report on Azerbaijan

Since our visit to Baku [oxcarre.blogspot.com] a few weeks ago, we gained additional interests in the developments in Azerbaijan. Today, the Financial Times issued a Special Report on the country. available here [FT.com], with the main tag line:
Reform offers the best hope for national stability

OxCARRE seminar: Getting Incentives Right: Human Capital Accumulation and Natural Resource Booms

Today, OxCARRE's Gerhard Toews will present on

Getting Incentives Right: Human Capital Accumulation and Natural Resource Booms

Abstract (from Februari 2014 version)

One of the major factors restricting demand for education in developing economies is limited employment opportunities for educated labour force on the local job market. Thus, removing this obstacle should become a crucial factor contributing to the accumulation of human capital. We offer an empirical test for this proposition, looking at the consequences of resource boom for demand for education in Kazakhstan in 2001-2005, using a unique dataset of the Household Budget Survey. The oil boom provides us with the necessary exogenous variation to establish the causality. We show that in resource-rich regions of Kazakhstan resource boom increases the likelihood for the households to pay tuition fees and the probability of employment in the formal sector for educated labour force. We are able to refute the conjecture that our effect is driven merely by growing income of the households (Engel curve effect). Thus, in addition, our paper also provides insights as to whether private demand for education can compensate the known deficits of public provision of education in resource-rich countries.

Working paper available here [eea-esem.com]

OxCARRE seminar: James Fenske, Oil and ethnic inequality in Nigeria

Today's OxCARRE's brownback seminar at 12h has James Fenske presenting his paper with Igor Zurimendi, on

Oil and Ethnic inequality in Nigeria. 

Abstract

Oil prices experienced in early life predict differential adult outcomes across Nigerian ethnic groups. Our difference-in-difference approach compares members of south- ern ethnicities to other Nigerians from the same birth cohort. Greater prices in a southern individual’s birth year predict positive relative outcomes, including reduced fertility, de- layed marriage, higher probabilities of working and having a skilled occupation, and greater schooling. By contrast, health outcomes suffer, including reduced height and increased BMI. These microeconomic impacts can be explained by macroeconomic responses to greater oil prices. Relative Southern incomes increase, food production declines, maternal labor inten- sifies, and Southern conflict rises.

See here for the earlier post, here for the working paper

New Research: Extractive industries and poverty: A review of recent findings and linkage mechanisms

A meta-study on the connection between poverty and mining comes out particularly depressing, "we find industrial mining to be more frequently associated with poverty exacerbation".

Extractive industries and poverty: A review of recent findings and linkage mechanisms

by Jonathan Gamu [ubc.ca], Philippe Le Billon [ubc.ac] (both Liu Institute for Global Issues, UBC) and Samuel Spiegel [ed.ac.uk] (University of Edinburgh)

Abstract

This article surveys fifty-two empirical studies on relationships between extractive industries and poverty, addressing both poverty impacts and possible linkage mechanisms. Distinguishing these studies by mode of resource extraction, we find industrial mining to be more frequently associated with poverty exacerbation, and artisanal mining with poverty reduction. Poverty exacerbation findings are more pronounced in cross-national statistical studies and ethnographic local case studies, especially when relative deprivation and longer-term impacts are taken into account; while sub-national census-based studies tend to show lower poverty levels in areas with extractive sector activities. A review of thirteen specific linkages between extractive industries and poverty highlights the importance of governance institutions and the limited effects of Corporate Social Responsibility activities. Methodologically, our survey points to the dominance of industrial mining-related data in cross-national and sub-national studies and the overlooked effects of artisanal and small-scale mining on poverty reduction at analytical scales larger than community-level. Such findings call for integrated studies assessing effects on poverty at various scales and attending to the specificities of mining-related livelihoods. Nested mixed-methods including place-based ethnographic observation, longitudinal surveys, as well as socioeconomic and political analysis across multiple scales are needed to provide more robust contextual understandings of the relationships between extractive sectors and poverty.

Read further here [sciencedirect.com].

IMF Fin&Dev: Sharing the Wealth

In last month's IMF publication Finance and Development, IMF Economists Sanjeev Gupta [sanjeevguptadocs.com], Alex Segura-Ubiergo [repec.org], and Enrique Flores [imf.org] wrote a piece on

Sharing the wealth

Countries that enjoy a resource windfall should be prudent about distributing it all directly to their people. The experience of the success stories suggests that natural resource wealth management requires a commitment to three interrelated principles: fiscal transparency, a rules-based fiscal policy, and strong institutions for public financial management. Some suggest that governments should give up their resource revenue and distribute it directly to the population. There are some good arguments to support this view—and strong arguments against it. Direct distribution is not a silver bullet. 

The article is a general audience edition of a discussion paper of them: Direct Distribution of Resource Revenues: Worth Considering? [imf.org pdf]