Blessing and Curse

Abstract

Recent studies on the subnational resource curse contend that subnational rentier units suffer from the same nondemocratic tendency as their national counterparts. However, subnational rentier states worldwide exhibit contrasting political outcomes. Why are some subnational rentier units politically competitive whereas others are not? This article argues that rent-sharing regimes—the fiscal institutions for sharing resource revenues among levels of government—condition political competitiveness at the provincial level. Using novel time-series cross-sectional data on Argentina, a case with several hydrocarbon-rich units with exogenously created rent-sharing regimes, I show that oil creates negative political effects at the provincial level only when these institutions do not share—or share minor amounts of—rents with municipal governments. Conversely, political competition emerges when rent-sharing regimes distribute rents to municipal governments, as this shrinks large provincial budgets, allows municipalities to deliver public and private goods, and gives municipal politicians fiscal independence from provincial governments.

The Local Impact of Mining in Peruvian Districts: Evidence of a Subnational Resource Curse?

“…Additionally, our analysis relates to the literature on fiscal transfers to subnational governments and their subsequent use in Latin American countries (Brollo et al, 2013;Caselli and Michaels, 2013;Diaz-Rioseco, 2016;Gervasoni, 2010;Litschig and Morrison, 2013;Monteiro and Ferraz, 2012). Brollo et al (2013) study the effect of fiscal transfers both theoretically as well as empirically, and they find that in Brazil, increasing federal transfers to municipal governments lead to an increase in observed corruption and reduce the average education of local politicians.…”

Modes of Extraction in Latin America’s Lithium Triangle: Explaining Negotiated, Unnegotiated, and Aborted Mining Projects

“…Still, recent research on mineral extraction highlights the industry's beneficial effects (Brunnschweiler 2008;Lederman and Maloney 2008), with new studies of lithium mining finding that it spurs innovation in productivity-enhancing technologies (López et al 2018;Montenegro Bravo 2018). Other studies show that resource wealth can have contrasting effects, acting alternatively as a curse or a blessing depending on mediating institutional factors (Snyder and Bhavnani 2005;Snyder 2006;Luong and Weinthal 2012;Díaz-Rioseco 2016).…”

“…Most previous research on the effects of resource wealth focuses on the national level, overlooking the territorial, subnational dimension. Recent studies increasingly exploit subnational variation in the distribution of mineral wealth to test, refine, and even challenge the national "resource curse" thesis (Arellano-Yanguas 2011;Arce 2014;Díaz-Rioseco 2016;Orihuela 2017;González 2018;González and Lodola 2019;Jaskoski 2022). 4 These studies show that causal mechanisms proposed to explain the pernicious socioeconomic consequences of resource wealth at the national level either do not travel to subnational levels or require significant modifications when applied there (see, e.g., Goldberg et al 2008;Monteiro and Ferraz 2012).…”

Fiscal Origins of Subnational Democracy: Evidence from Argentina

“…18 Yet, recent research on Argentina nuances these results, as it finds that oil wealth decreases political contestation and hinders development when provinces and producing districts have monopolies over hydrocarbon rents. 19 Another strand of research has focused on fiscal federalism-based rentierism, arguing that large federal transfers are analytically equivalent to resource rents. Particularly, two common features across federations, especially in the developing world, breed rentierism: the centralization of tax collection at the federal government, and the resulting vertical fiscal imbalances, that is, the gap between subnational governments' own tax revenue and their expenditures.…”