The natural resource curse: Evidence from the Colombian municipalities

Abstract

This paper evaluates the effect of natural resource revenue on expenditure efficiency. Using a panel of Colombian municipalities over 2003–2011, we use a two‐step procedure to estimate the effect of natural resource revenue on municipal efficiency. First, the technical efficiency of local governments is calculated through a robust non‐parametric method. These estimates are then used in a second step to evaluate how the local government's efficiency varies with exogenous variation in royalties. Our findings indicate that royalties reduce efficiency in the provision of education and health care services, providing evidence of one of the mechanisms explaining the natural resource curse.

The impact of preemptive investment on natural disasters

“…To evaluate the impact of preemptive investment on future natural disasters in Colombia, we use four different measures that capture direct and indirect market losses, as well as non‐market losses from landslide‐related events. Local governments' investment decisions regarding preventive measures against natural disasters may be correlated with institutional characteristics such as law enforcement capacity and expenditure efficiency where the latter shows significant regional variation across spending sectors and regions (Ayala‐García & Dall'erba, 2020). Indeed, more control over the spread of informal settlements can reduce the need for preventive spending and less efficient municipalities would require more resources to effectively prevent natural disasters.…”

Review of the social and economic dynamics under Colombian mining policy: Cursing the blessing?

“…Furthermore, the local provision of public goods in education, health, and water is worse in those municipalities whose revenues are based on mining royalties, than in those municipalities mainly funded by tax revenues. According to Ayala‐García and Dall'erba (2021), mining royalties reduced efficiency in education and health provision, in the 2003–2011 period. Nevertheless, Santos (2018) and Bonilla Mejía (2020) show contrasting results about the effect of the gold mining boom in the 2000s, on school attendance.…”

Public sector efficiency in Brazil

“…This paper follows the Order‐m efficiency estimation, which is more robust to outliers and/or extreme values, which are the main points under criticism against the envelopment estimators. Since then, it has been increasingly applied for real data (Cunha Marques & De Witte, 2011; Felder & Tauchmann, 2013; Pilyavsky & Staat, 2008; Tauchmann, 2012), and applications of this method to local government efficiency can be found in Ayala‐García and Dall'erba (2021), Gu and Ayala‐García (2021), and Agasisti and Zoido (2019).…”