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Reversing the Resource Curse: Foreign Corruption Regulation and Economic Development

Author

Listed:
  • Hans B. Christensen

    (University of Chicago - Booth School of Business)

  • Mark Maffett

    (University of Chicago - Booth School of Business)

  • Thomas Rauter

    (University of Chicago - Booth School of Business)

Abstract

We examine whether foreign corruption regulation reduces corruption and increases the local economic benefits of resource extraction. After a mid-2000s increase in enforcement of the US Foreign Corrupt Practices Act (FCPA), economic activity (measured by nighttime luminosity) increases by 14% (3%) in African communities within a 10- (25-) kilometer radius of resource extraction facilities whose owners are subject to the FCPA. Local perceptions of corruption decline by 8%. Consistent with changes in existing extraction firms’ business practices contributing to the increase in development, the association between resource production, instrumented by world commodity prices, and local economic activity increases by 40%.

Suggested Citation

  • Hans B. Christensen & Mark Maffett & Thomas Rauter, 2020. "Reversing the Resource Curse: Foreign Corruption Regulation and Economic Development," Working Papers 2020-155, Becker Friedman Institute for Research In Economics.
    • Handle: RePEc:bfi:wpaper:2020-155
    as

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    File URL: https://repec.bfi.uchicago.edu/RePEc/pdfs/BFI_WP_2020155.pdf
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    References listed on IDEAS

    as
    1. Fernando M. Arag?n & Juan Pablo Rud, 2013. "Natural Resources and Local Communities: Evidence from a Peruvian Gold Mine," American Economic Journal: Economic Policy, American Economic Association, vol. 5(2), pages 1-25, May.
    2. Joseph G. Altonji & Todd E. Elder & Christopher R. Taber, 2005. "Selection on Observed and Unobserved Variables: Assessing the Effectiveness of Catholic Schools," Journal of Political Economy, University of Chicago Press, vol. 113(1), pages 151-184, February.
    3. Amadou Boly & Nicola D. Coniglio & Francesco Prota & Adnan Seric, 2015. "Which Domestic Firms Benefit from FDI? Evidence from Selected African Countries," Development Policy Review, Overseas Development Institute, vol. 33(5), pages 615-636, September.
    4. Stefan Zeume, 2017. "Bribes and Firm Value," The Review of Financial Studies, Society for Financial Studies, vol. 30(5), pages 1457-1489.
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    Cited by:

    1. Pietro Bonetti & Gaizka Ormazabal, 2023. "Boosting Foreign Investment: The Role of Certification of Corporate Governance," Journal of Accounting Research, Wiley Blackwell, vol. 61(1), pages 95-140, March.
    2. Colonnelli, Emanuele & Lagaras, Spyridon & Ponticelli, Jacopo & Prem, Mounu & Tsoutsoura, Margarita, 2022. "Revealing corruption: Firm and worker level evidence from Brazil," Journal of Financial Economics, Elsevier, vol. 143(3), pages 1097-1119.

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    More about this item

    Keywords

    Foreign corruption regulation; Foreign Corrupt Practices Act (FCPA); economic development; natural resource extraction;
    All these keywords.

    JEL classification:

    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General
    • F60 - International Economics - - Economic Impacts of Globalization - - - General
    • K2 - Law and Economics - - Regulation and Business Law
    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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