Natural Resources, Decentralization, and Risk Sharing: Can Resource Booms Unify Nations?

Fidel Perez-Sebastian and Ohad Raveh
Authors registered in the RePEc Author Service: Fidel Perez Sebastian

No 142, OxCarre Working Papers from Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford

Abstract: Previous studies imply that a positive regional fiscal shock, such as a resource boom, strengthens the desire for separation. In this paper we present a new and opposite perspective. We construct a model of endogenous fiscal decentralization that builds on two key notions: a trade-off between risk sharing and heterogeneity, and a positive association between resource booms and risk. The model shows that a resource windfall causes the nation to centralize as a mechanism to either share risk and/or prevent local capture, depending on the relative bargaining power of the central and regional governments. We provide cross country empirical evidence for the main hypotheses,finding that resource booms: (i) decrease the level of fiscal decentralization with no U-shaped patterns, (ii) cause the former due to risk sharing incentives primarily when regional governments are relatively strong, and (iii) have no effect on political decentralization.

Keywords: Natural resources; decentralization; bargaining power; risk sharing; secession (search for similar items in EconPapers)
JEL-codes: H77 Q33 (search for similar items in EconPapers)
Date: 2015-07-15
New Economics Papers: this item is included in nep-opm and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ora.ox.ac.uk/objects/uuid:a29d2d50-9db8-43e9-80f7-5cb23dacf02d (text/html)

Related works:
Journal Article: Natural resources, decentralization, and risk sharing: Can resource booms unify nations? (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oxf:oxcrwp:142

Access Statistics for this paper

More papers in OxCarre Working Papers from Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford Contact information at EDIRC.
Bibliographic data for series maintained by Melis Boya ( this e-mail address is bad, please contact ).