Do Oil Windfalls Improve Living Standards? Evidence from Brazil

Francesco Caselli and Guy Michaels

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: We use variation in oil output among Brazilian municipalities to investigate the effects of resource windfalls. We find muted effects of oil through market channels: offshore oil has no effect on municipal non-oil GDP or its composition, while onshore oil has only modest effects on non-oil GDP composition. However, oil abundance causes municipal revenues and reported spending on a range of budgetary items to increase, mainly as a result of royalties paid by Petrobras. Nevertheless, surveybased measures of social transfers, public good provision, infrastructure, and household income increase less (if at all) than one might expect given the increase in reported spending. To explain why oil windfalls contribute little to local living standards, we use data from the Brazilian media and federal police to document that very large oil output increases alleged instances of illegal activities associated with mayors.

Keywords: Brazil; corruption; Dutch disease; fiscal windfalls; natural resources and oil (search for similar items in EconPapers)
JEL-codes: E02 E62 H11 H40 H71 H72 H75 H76 O11 O13 O32 O33 (search for similar items in EconPapers)
Date: 2009-12
New Economics Papers: this item is included in nep-ene and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (79)

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Related works:
Journal Article: Do Oil Windfalls Improve Living Standards? Evidence from Brazil (2013)
Working Paper: Do oil windfalls improve living standards? Evidence from Brazil (2013)
Working Paper: Do Oil Windfalls Improve Living Standards? Evidence from Brazil (2009)
Working Paper: Do oil windfalls improve living standards?: evidence from Brazil (2009)
Working Paper: Do Oil Windfalls Improve Living Standards? Evidence from Brazil (2009)
Working Paper: Do Oil Windfalls Improve Living Standards? Evidence from Brazil (2009)
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