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.

Today's OxCARRE's seminar: Ryan Kellogg, Hotelling under pressure.

Today we have Ryan Kellogg [umich.edu] (University of Michigan) presenting his work with Soren T. Anderson [msu.edu]  (Michigan State University) and Stephen W. Salant [umich.edu] (University of Michigan)

Hotelling Under Pressure

Abstract:

We show that oil production from existing wells in Texas does not respond to price incentives. Drilling activity and costs, however, do respond strongly to prices. To explain these facts, we reformulate Hotelling's (1931) classic model of exhaustible resource extraction as a drilling problem: firms choose when to drill, but production from existing wells is constrained by reservoir pressure, which decays as oil is extracted. The model implies a modified Hotelling rule for drilling revenues net of costs and explains why production is typically constrained. It also rationalizes regional production peaks and observed patterns of price expectations following demand shocks.

Available here [NBER.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: 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].

New Research: The Economic Aftermath of Resource Booms

New research forthcoming in Economic Journal by Grant D. Jacobsen and Dominic P. Parker

The Economic Aftermath of Resource Booms: Evidence from Boomtowns in the American West

Abstract:
The current U.S. oil and gas boom is injecting labour, capital, and revenue into communities near reserves. Will these communities be cursed with lower long run incomes in the wake of the boom? We study the oil boom-and-bust cycle of the 1970s and 1980s to gain insights. Using annual data on drilling to identify western boom-and-bust counties, we find substantial positive local employment and income effects during the boom. In the aftermath of the bust, however, we find that incomes per capita decreased and unemployment compensation payments increased relative to what they would have been if the boom had not occurred.