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The Non-Monotonic Political Effects of Resource Booms

Stanislao Maldonado ()

No 121, Working Papers from Peruvian Economic Association

Abstract: This study uses variation in natural resource rents and mineral production among Peruvian municipalities to analyze the impact of resource booms on local politicians' behavior and citizens' well-being. Although this topic has recently attracted scholarly interest, existing empirical evidence remains inconclusive regarding whether resource booms are beneficial or detrimental to citizens via their effects on public good provision and living standards. Despite many existing theoretical models allowing for the possibility of non-monotonic responses, empirical literature has largely approached this phenomena using linear models, thus misunderstanding the complex nature of resource booms. By examining recent extraordinary mineral price increases along with particular rules for natural resource rent distribution in Peru, I show that the effects of resource booms on reelection outcomes, political competition, public goods provision, clientelism, and well-being are conditional to the size of the rents in a non-monotonic fashion. These results are robust to endogenous production responses and are consistent with recent theoretical scholarship for resource rich economies.

Keywords: Resource booms; political competition; reelection; intergovernmental transfers (search for similar items in EconPapers)
JEL-codes: D72 D78 Q33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-pol and nep-ure
Date: 2018-04
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