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Oil booms and subnational public investment: a case-study for Colombia

Author

Listed:
  • Jaime Bonet-Morón
  • Gerson Javier Pérez-Valbuena
  • Lucas Marín-Llanes

Abstract

Theoretical and empirical studies on oil price shocks have mainly focused on measuring its relationship with macroeconomic performance in developing countries. However, the literature has not explored causal effects of oil price variations on subnational public investment. Using a difference-in-differences strategy, this paper contributes to the literature in identifying these effects for both, departments and municipalities in Colombia. Our results suggest that the most recent oil boom, brought by the rise in international oil prices, had mostly positive and disproportionate effects of public investment on oil producing departments and municipalities. On one hand, departments prioritized their investments in five sectors: recreation and sports, agriculture, transportation, attention to vulnerable population, and justice. On the other hand, for municipalities, four sectors were the most benefited: institutional strengthening, justice, equipment, and recreation and sports. **** RESUMEN: Gran parte de los estudios teóricos y empíricos sobre choques petroleros se han enfocado en medir su relación con el desempeno macroeconómico en los países en Desarrollo. Sin embargo, estos estudios no han explorado los efectos causales de las variaciones en los precios del petróleo sobre la inversión pública subnacional. Haciendo uso de diferencia-endiferencias, este documento contribuye a la literatura en identificar estos efectos tanto para departamentos como para municipios en Colombia. Los resultados sugieren que el más reciente choque petrolero, generado por el aumento en los precios internacionales del petróleo, tuvo en su mayoría efectos positivos y significativos sobre la inversión pública de departamentos y municipios productores. Por un lado, los departamentos priorizaron sus inversiones en cinco sectores: recreación y deporte, agricultura, transporte, atención a población vulnerable y justicia. Por otro lado, para los municipios los sectores más beneficiados fueron: fortalecimiento institucional, justicia, equipamiento y recreación y deporte.

Suggested Citation

  • Jaime Bonet-Morón & Gerson Javier Pérez-Valbuena & Lucas Marín-Llanes, 2019. "Oil booms and subnational public investment: a case-study for Colombia," Documentos de Trabajo Sobre Economía Regional y Urbana 17701, Banco de la República, Economía Regional.
    • Handle: RePEc:col:000102:017701
    DOI: 10.32468/dtseru.283
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    More about this item

    Keywords

    Subnational investment; price shocks; oil booms; inversión subnacional; choques de precios; bonanza petrolera;
    All these keywords.

    JEL classification:

    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)

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