Journal of Development Studies special issue on natural resources

The Journal of Development Studies is brining out a special issue on Natural resources with the following papers:


Elissaios Papyrakis ([uea.ac.uk] University of East Anglia)

The Resource Curse - What Have We Learned from Two Decades of Intensive Research: Introduction to the Special Issue

There has been increasing interest in the so-called ‘resource curse’, that is the tendency of resource-rich countries to underperform in several development outcomes. This has generated a mountain of (often contradictory) evidence leaving many floundering in the flood of information. This special issue compiles eight papers from some of the most prominent contributors to this literature, combining original research with critical reflection on the current stock of knowledge. The studies collectively emphasise the complexities and conditionalities of the ‘curse’ – its presence/intensity is largely context-specific, depending on the type of resources, socio-political institutions and linkages with the rest of the economy.

read on here [tandfonline.com].


Frederick Van Der Ploeg ([oxcarre.ox.ac.uk] OxCARRE, University of Oxford) and Associate researcher Steven Poelhekke ([sites.google.com, Vrije Universiteit Amsterdam)

The Impact of Natural Resources: Survey of Recent Quantitative Evidence

The cross-country empirical evidence for the natural resource curse is ample, but unfortunately fraught with econometric difficulties. A recent wave of studies on measuring the impact of natural resource windfalls on the economy exploits novel datasets such as giant oil discoveries to identify effects of windfalls, uses natural experiments and within-country econometric analysis, and estimates local impacts. These studies offer more hope in the search of quantitative evidence.

Read on here [tandfonline.com].

Emma Gilberthorpe ([uea.ac.uk] University of East Anglia) & Dinah Rajak ([sussex.ac.uk] University of Sussex)

The Anthropology of Extraction: Critical Perspectives on the Resource Curse

Attempts to address the resource curse remain focussed on revenue management, seeking technical solutions to political problems over examinations of relations of power. In this paper, we provide a review of the contribution anthropological research has made over the past decade to understanding the dynamic interplay of social relations, economic interests and struggles over power at stake in the political economy of extraction. In doing so, we show how the constellation of subaltern and elite agency at work within processes of resource extraction is vital in order to confront the complexities, incompatibilities, and inequities in the exploitation of mineral resources.

read on here [tandfonline.com].

Elissaios Papyrakis ([uea.ac.uk] University of East Anglia), Matthias Rieger ([weebly.com] Erasmus University Rotterdam) & Emma Gilberthorpe ([uea.ac.uk] University of East Anglia)

Corruption and the Extractive Industries Transparency Initiative

The Extractive Industries Transparency Initiative (EITI) has received much attention as a scheme that can help reduce corruption in mineral-rich developing economies. To our knowledge, this paper provides the first empirical attempt (using panel data) to explore how EITI membership links to changes in corruption levels. We also examine whether the different stages in EITI implementation (initial commitment, candidature, full compliance) influence the pace of changes in corruption. We find that EITI membership offers, on the whole, a shielding mechanism against the general tendency of mineral-rich countries to experience increases in corruption over time.

read on here [tandfonline.com].


Doug Porter ([worldbank.org] Worldbank) & Michael Watts ([berkeley.edu] UC Berkeley Geography)

Righting the Resource Curse: Institutional Politics and State Capabilities in Edo State, Nigeria

The poor record of liberal reforms sponsored by the international community in postcolonial settings underscores the real politik of institutional change. What we call a ‘new normal’ in development policy and practice foregrounds the role of agency – leadership, networks of connectors and convenors, entrepreneurs and activists – but it has less to say about the political and economic conditions of possibility in which agents operate. The putative powers of agency seem most challenged in contexts of extreme resource dependency and the resource curse. The particular case of Edo, a state in the oil rich Niger delta region of Nigeria, illustrates the intersection of agency and structural conditions to show how ‘asymmetric capabilities’ can emerge to create, constrain and make possible particular reform options. 

Read on here [tandfonline.com].


R. M. Auty ([lancaster.ac.uk] University of Lancaster)

Natural Resources and Small Island Economies: Mauritius and Trinidad and Tobago

Historically, small economies, especially resource-rich ones, underperformed on average relative to their larger counterparts. Small island economies appear still more disadvantaged due to remoteness from both markets and agglomeration economies. Yet a comparison of two small island economies with similar initial conditions other than their mineral endowment suggests that policy outweighs size, isolation and resource endowment in determining economic performance. Resource-poor Mauritius adopted an unfashionable policy of export manufacturing that systematically eliminated surplus labour, which drove economic diversification that sustained rapid GDP growth and political maturation. Like most resource-rich economies, Trinidad and Tobago pursued policies that absorbed rent too rapidly, which impeded diversification and created an illusory prosperity vulnerable to collapse.

Read on here [tandfonline.com].

Gavin Hilson ([surrey.ac.uk] University of Surrey) & Tim Laing (University of the West Indies)

Guyana Gold: A Unique Resource Curse?

This article offers explanations for the underwhelming economic performance of Guyana, a country heavily dependent on the revenue generated from gold mining. Here, government intervention has spawned a gold mining sector which today is comprised exclusively of local small and medium-scale operators. But whilst this rather unique model appears to be the ideal blueprint for facilitating local development, the country seems to be experiencing many of the same setbacks that have beset scores of other resource-rich developing world economies. Unless these problems are anticipated, properly diagnosed and appropriately tackled, a resource curse-type outcome is inevitable, irrespective of the context.

Read on here [tandfonline.com].

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 Research: Oil and Gas Revenue Allocation to Local Governments in Eight [US] States

A new working paper/report is available from NBER, Richard G. Newell [duke.edu] and Daniel Raimi [duke.edu] both Duke University.

Oil and Gas Revenue Allocation to Local Governments in Eight States.

Abstract:

This report examines how oil and gas production generates revenue for local governments in eight states through four key mechanisms: (i) state taxes or fees on oil and gas production; (ii) local property taxes on oil and gas property; (iii) leasing of state-owned land; and (iv) leasing of federally-owned land. To compare across states, we show the percentage of total revenue generated by oil and gas production that flows to local governments from these revenue sources. We also connect these calculations to related research to assess whether state and local policies are providing sufficient revenue for local governments to manage increased costs associated with shale development. We find that in most cases, existing policies appear to provide adequate revenue for local governments to manage increased costs associated with growing oil and gas activity. As of 2014, revenues fall short of the costs imposed on local governments in some highly rural regions experiencing rapid, large-scale development, notably the Bakken region of North Dakota and Montana, select counties in Texas, and select local governments in Colorado and Wyoming. Collaboration between industry and local governments, especially on road repairs, could reduce public costs.

Available here [nber.org]. 

Pipelines through native land. Developments in Northern British Columbia.

Oil and gas retrieved in Canada's most northern parts and Alberta's tar sands is generally speaking geographically far from 'world markets'. Proposals to fix this with new pipelines have faced delays because of such things as environmental risks highlighted by the those that rely on the land for other sources of income. For instance, this is among the reasons for the delay of the KeystoneXL pipeline, proposed to bring Alberta's oil to refineries in Southern USA.

The other route is to bring the oil and gas westwards through British Columbia, where it can reach the coast, and carriers can ship it to Asia, where major demand growth is expected to come from for the future. Although these proposals too ran in objections of First Nations, and alternative route, proposed by another company, has recently won their support.

Many pipeline proposals for the route west have run in strong opposition from First Nations in Alberta. Their opposition is to large extent based on the risk that a pipeline poses to their traditional hunting and fishing ground. Although poverty is major problem in some of those communities, proposals by international construction companies have not everyones favour. "The answer is still no" [fernwoodpublishing.ca], a book consisting of series of interviews conducted by two academics with representatives of the region, details their arguments and objections to such plans, in this case particular the one proposed by Enbridge.

An another gas pipeline was recently rejected by Lax Kwa'laams who where offered CA$1B for their consent of a gas terminal on their lands, an island in front of the B.C. main coast in the region of Price Rupert, at the mount of the Skeena river. The dangers that the first nation sees has both to do with the construction phase, that could harm marine life in an area used by salmon to mature before moving up-river, the impact of pipeline on the seabed marine life, as well as the impact on marine environment of daily arrival and departure of LNG carriers. For these reason they recently rejected the plan (CBC.ca, Globe and Mail, HuffingtonPost.ca).

As these articles highlight, and is also part of the discussions in the "The answer is still no", it is not that First Nations reject every such development, although this is occasionally how it is portrayed (sometimes quite viciously, labelling environment protestors and first nations terrorists, Globe and Mail, see also the recent interview with the newly elected Ms Universe, Ashley Callingbull-Burnham). A direct competitor proposal to the Enbridge pipeline, Eagle Spirit Energy Holding, recently gained (newswire.ca, prnewswire.ca) the support of First Nations, including those of Lax Kwa'laams. The trick? Eagle Spirit offers [financialpost.com] a different stake in the project to first nations, proposes a route that circumvents more of the vulnerable waters, going more through grounds of first nations supportive of the plan, and ends in a different area at the coast where it is expected to cause less environmental harm to the wider region. It helped too that the company is headed by members of local first nations, and the plan was made in direct consultation with first nations in B.C. and in cooperation with first nations in Alaska and Alberta. This contrasts with the lack of sincere consultation of Enbridge as perceived by First Nations.

The underlying dynamics are about balancing the (deemed inevitable) development of arctic and other previously hard to extract natural resources, the impact of such developments on local communities to their traditional income sources (forestry, fishing, hunting etc), their (hedonistic) value of the local environment and the benefits that may accrue to local communities from resource extraction. A non-negligible factor also appears to be the process through which these plans are pushed through and property rights. Much of the power of first nations comes from their rights as traditional dwellers of the land, whereas the federal and provincial government still tends to see these lands as theirs, or crown land, to do with as they please.

Although I tried my best, I'm not entirely confident that I presented all facts and views entirely correct. Comments are welcome below or by email.  

New Research: How does Local Mining Impact on Rural Immigration: Case of Mongolia

A short paper by Amartuvshin Amarjargal (University of the Humanities, Ulaanbaatar) , Yaoqi Zhang School of Forestry & Wildlife Sciences, Auburn University, Jiquan Chen (Michigan State University) write on

How does Local Mining Impact on Rural Immigration: Case of Mongolia

Abstract

After 70 years of communist regime, Mongolia chose a radical transition for democracy and a market economy in 1990. Since the 2000s, the Mongolian government has been promoting the mining industry to increase its foreign exchanges. The mining sector may offer local job opportunities and revenues, but might also cause loss and degradation of pasture land the local people depend on. An empirical study is conducted to investigate whether the immigration of rural people from a mining area is different from that of a non mining area using a probit model based on a 2013 workforce survey of Mongolia. The result shows that mining soums receive fewer outsiders than the non-mining soums, suggesting local mining activities exert limited economic linkage in local community for a case of Mongolia.

See paper here [colostate.edu].

What is also suggested in the paper, but doesn't come out strongly in the statistics is that mining may cause an outward push from local communities away from mining because of harmful effects of mining development on their traditional sources of income of cattle. Mining is accompanied with the buildup of dust, and pollution of water resources that force nomadic communities to move away. Consequently, since these negative effects are born by a some communities more than others, they add to the unequal distribution of the rents. At least, this is what anecdotal evidence suggest [futurechallenges.org] according to the first author. Better data, particularly with a time-dimension, would be required to show these things in a statistical way.

New Research: Economics of modern energy boomtowns: do oil and gas shocks differ from shocks in the rest of the economy?

Alexandra Tsvetkova [ideas.repec.org] and Mark Partridge [osu.edu], both from Ohio State University, write on

Economics of modern energy boomtowns: do oil and gas shocks differ from shocks in the rest of the economy?

abstract:

The U.S. shale boom has intensified interest in how the expanding oil and gas sector affects local economic performance. Research has produced mixed results and has not compared how energy shocks differ from equal-sized shocks elsewhere in the economy. What emerges is that the estimated impacts of energy development vary by region, empirical methodology, as well as the time horizon that is considered. This paper captures these dimensions to present a more complete picture of energy boomtowns. Utilizing U.S. county data, we estimate the effects of changes in oil and gas extraction employment on total employment growth as well as growth by sector. We compare this to the effects of equal-sized shocks in the rest of the economy to assess whether energy booms are inherently different. The analysis is performed separately for nonmetropolitan and metropolitan counties using instrumental variables. We difference over 1-, 3-, 6-, and 10- year time periods to account for county fixed effects and to assess responses across different time horizons. The results show that in nonmetro counties, energy sector multiplier effects on total county employment first increase up to 6-year horizons and then decline for 10-year horizons. In metro counties, 1-year differences analysis suggests crowding out though the multipliers are insignificant in longer horizons. We also observe positive spillovers to the nontraded goods sector, while spillovers are small or negative for traded goods. Yet, equal-sized shocks in the rest of the economy produce more jobs on average than oil and gas shocks, suggesting that policymakers should seek more diversified development.

Paper available here [pdf, uni-muenchen.de] 

New Research on Australia's mining boom

David A. Fleming and Thomas G. Measham [csiro.au] from CSIRO in Canberra, Australia have a collection of published papers documenting the effects of the mining boom in Australia.

In Australian Journal of Agricultural and Resource Economics [wiley.com], with Dusan Paredes,
Understanding the resource curse (or blessing) across national and regional scales: Theory, empirical challenges and an application

The relationship between resource extraction activity and economic growth has been widely studied in the literature, and the resource curse hypotheses emerged as a theory to explain the effects of resource windfalls on national economies. However, within countries, resource booms and busts can have distinctive effects across local economies, as extractive regions face particular economic consequences unlikely to be observed in nonresource regions. Empirically, most studies analysing the resource curse have relied on cross-country models to estimate effects and inform policy; however, the use of regional – within-country – analysis has gained attention from scholars lately, promoted by two advantages: it avoids unobserved country heterogeneities confounding economic outcomes caused by resources and exploits the subnational quasi-natural experimental conditions generated by endowments. This paper contributes to the resource curse literature by discussing its theoretical causes across scale (regional vs. national effects) and highlighting the empirical challenges involved in the analysis of mining economic impacts across regions. We complement the discussions by econometrically modelling economic growth across nonmetropolitan substate regions of Australia during a period of resource windfalls, finding that in most cases, resources have been a blessing for local economies, although negative effects have also been experienced in parts of the country.

In Resources Policy [sciencedirect.com]

Local job multipliers of mining

The mining industry is capital intensive, and generally, direct labour employed is low compared to other industries. Considering this, when analysing local economic effects of mining it is important to observe local job multipliers that the industry generates in other sectors of the economy. In this study we use data from the recent Australian mining boom to estimate local job multipliers from mining, using econometric models and avoiding the rigidities and strong assumptions that input–output based models rely on. With census data and samples of Australian sub-state regions, our estimations show that local multipliers of mining are important for some local services sectors such as transport and rental and accommodation services, while local job spillovers into tradable goods sectors (manufacturing and agriculture) are statistically not significant. We also show how the magnitude of local multipliers varies nationwide from those of regions where operating mines are located.

In Australian Journal of Agricultural and Resource Economics [wiley.com]
Local economic impacts of an unconventional energy boom: the coal seam gas industry in Australia

Complementing the scarce economic literature about local impacts of energy extraction booms, this paper empirically investigates economic outcomes related to the new coal seam gas (CSG) industry located across southern Queensland. This Australian state has seen an unprecedented inflow of investments into the extraction of this previously unexploited unconventional natural gas over the last decade. We analyse census data to study income and employment effects associated with the CSG boom, exploiting the quasi-experimental conditions provided by CSG extraction areas (treatment regions) and regions without this development (control regions). Findings show that treatment regions have higher income growth than control areas during 2001–2011 for families residing locally and for individuals present on census night. Employment in the mining sector also shows higher growth as has non-mining employment in some areas. We include comparisons between CSG areas with no major mining history (the Surat basin) and CSG areas where mining was important before the CSG boom (the Bowen basin), to better understand boom effects in areas with different initial mining industry importance in their economies. Local job multipliers are also analysed for Surat basin CSG areas, where positive impacts (job spillovers) are restricted to construction and professional services jobs, while agricultural jobs have decreased.

In Australian Geographer [tandfonline.com],
Income inequality across Australian regions during the mining boom: 2001-11

As mining expands throughout the world, a growing body of literature is focusing on the relationship between mining and well-being in locations where resource extraction occurs. Although many topics such as employment and migration have been researched, the impacts of mining on income inequality have received less attention from scholars. Income inequality is a highly debated topic and the Gini coefficient (GC) one of the most popular indicators used to measure and discuss it. In this paper we estimate GCs for all sub-State regions of Australia and analyse their changes during the ‘mining boom decade’ (2001–11) across mining and non-mining regions. Our results show that, on average, income inequality increased by around 4.8 per cent in mining regions, compared to 8.7 per cent in the average non-mining region. However, the results also show important variation in changes of GC across mining regions, suggesting that the industry is likely to affect the distribution of local incomes in different ways. The method we propose to estimate GCs for regional areas and the results obtained across mining and non-mining regions provide important insights for future research and for regional policy makers, especially those concerned with the socio-economic impacts of industries such as mining across regions.

New research: The local economic impacts of resource abundance : what have we learned?

In the line with the reviews by Gamu, Le Billon and Spiegel, and Cust and Poelhekke [both oxcarre.blogspot.com],

Fernando M. Aragona, Punam Chuhan-Pole and Bryan Christopher Land of the World Bank present a new overview:

The local economic impacts of resource abundance : what have we learned?

Abstract:

What are the socioeconomic impacts of resource abundance? Are these effects different at the national and local levels? How could resource booms benefit (or harm) local communities? This paper reviews a vast literature examining these questions, with an emphasis on empirical works. First, the evidence and theoretical arguments behind the so-called resource curse, and other impacts at the country level, are reviewed. This cross-country literature highlights the importance of institutions. Then, a simple analytical framework is developed to understand how resource booms could impact local communities, and the available empirical evidence is examined. This emerging literature exploits within-country variation and is opening new ways to think about the relation between natural resources and economic development. The main message is that others factors, such as market mechanisms and local spillovers, are also relevant for understanding the impact of resource abundance. Finally, the paper discusses issues related to fiscal decentralization and provides ideas for future research.

available here [worldbank.org]

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]

New Research: Mining and local corruption in Africa

A new working paper by Andreas Kotsadam [wordpress.com], Eivind Hammersmark Olsen [uio.no], Carl Henrik Knutsen [uio.no], and Tore Wig [uio.no], all at University of Oslo (and other affilitations)

Mining and local corruption in Africa

Abstract:

We investigate whether mining affects local-level corruption in Africa. Several cross-country analyses report that natural resource production and wealth have ad- verse effects on political institutions, for instance by increasing corruption, whereas other country-level studies show no evidence of such “political resource curses”. These studies face well-known endogeneity and other methodological issues, and employing alternative designs and micro-level data would allow for drawing stronger inferences. Hence, we connect 90,000 survey respondents in four Afrobarometer survey waves to spatial data on about 500 industrial mines. Using a difference-in-differences strategy, we find evidence that mining increases bribe payments. Mines are initially located in less corrupt areas, but mining areas turn more corrupt after mines open and actively produce. A closer study of South Africa — using even more precise spatial matching of mines and survey respondents — corroborates the continent-wide results. Hence, mineral production is, indeed, a “curse” to local institutions.

Available here [pdf, uio.no]

New Research: The Local Impact of Mining on Poverty and Inequality: Evidence from the Commodity Boom in Peru

Norman Loayza [worldbank.org] (World Bank) Jamele Rigolini [iza.org] (IZA) write on

The Local Impact of Mining on Poverty and Inequality: Evidence from the Commodity Boom in Peru
Abstract:

This paper studies the impact of mining activity on socioeconomic outcomes in local communities in Peru. In the last two decades, the value of Peruvian mining exports has grown by fifteen times; and since a decade ago, one-half of fiscal revenues from mining have been devolved to local governments in producing regions. Has this boom benefitted people in local communities? We find evidence that producing districts have larger consumption per capita and lower poverty rates than otherwise similar districts. However, these positive impacts decrease drastically with administrative and geographic distance from mining centers. Moreover, consumption inequality within producing districts is higher than in comparable nonproducing districts. This dual effect of mining is partially accounted for by the better educated immigrants required and attracted by mining activity. The inequalizing impact of mining, both across and within districts, may explain the social discontent with mining in Peru, despite its enormous revenues.

Full paper here [perueconomics.org]

Which adds to the stock of papers on local impact and resource extraction, reviewed in a paper discussed last week [oxcarre.blogspot.co.uk]. See also the meta-analysis on mining and poverty, discussed here [oxcarre.blogspot.co.uk].

New OxCARRE Review Paper: The Local Economic Impacts of Natural Resource Extraction

OxCARRE affiliates Jim Cust [wordpress.com] (Oxford) and Steven Poelhekke [google.com] (VU Amsterdam) offer a review paper on

The Local Economic Impacts of Natural Resource Extraction

Abstract

Whether it is fair to characterize natural resource wealth as a curse is still debated. Most of the evidence derives from cross-country analyses, providing cases both for and against a potential resource curse. Scholars are increasingly turning to within-country evidence to deepen our understanding of the potential drivers, and outcomes, of resource wealth effects. Moving away from cross-country studies offers new perspectives on the resource curse debate, and can help overcome concerns regarding endogeneity. Therefore, scholars are leveraging datasets which provide greater disaggregation of economic responses and exogenous identification of impacts.

This paper surveys the literature on these studies of local and regional effects of natural resource extraction. We discuss data availability and quality, recent advances in methodological tools, and summarize the main findings of several areas of research. These include the direct impact of natural resource production on local labor markets and welfare, the effects of government spending channels resulting from mining revenue, and regional spillovers. Finally, we take stock of the state of the literature and provide suggestions for future research.

Full paper here [oxcarre.ox.ac.uk], at the OxCARRE Research Paper series [oxcarre.ox.ac.uk].