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Resource windfalls, Public Expenditures, and Local Economies

Author

Listed:
  • Antonella Bancalari

    (UCL-IZA)

  • Juan Pablo Rud

    (University of London/IFS/IZA)

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.

Suggested Citation

  • Antonella Bancalari & Juan Pablo Rud, 2025. "Resource windfalls, Public Expenditures, and Local Economies," Working Papers 348, Red Nacional de Investigadores en Economía (RedNIE).
    • Handle: RePEc:aoz:wpaper:348
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    File URL: https://rednie.eco.unc.edu.ar/files/DT/348.pdf
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    References listed on IDEAS

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    Keywords

    government transfers; labor markets; rural economies; general equilibrium effects; Peru;
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