Resource windfalls, Public Expenditures, and Local Economies

Antonella Bancalari and Juan Pablo Rud
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Antonella Bancalari: UCL-IZA
Juan Pablo Rud: University of London/IFS/IZA

No 348, Working Papers from Red Nacional de Investigadores en Economía (RedNIE)

Abstract: We use quasi-exogenous variation in the redistribution of natural resource tax revenues in Peru to study whether transfers to local governments can stimulate economic activity. Resource windfalls to non-extractive municipalities between 2006 and 2018 changed the size and composition of local government expenditures and had positive effects on local labor markets and household welfare. We find an increase in labor force participation, earnings, and formality in the private sector. The windfalls spur improvements in sectors that do not directly serve municipalities and especially benefit poorer rural areas, which experienced increases in household income and consumption, along with a poverty decline.

Keywords: government transfers; labor markets; rural economies; general equilibrium effects; Peru (search for similar items in EconPapers)
Pages: 82 pages
Date: 2025-01
New Economics Papers: this item is included in nep-env and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:aoz:wpaper:348

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