IDEAS home Printed from https://ideas.repec.org/p/idb/brikps/7520.html
   My bibliography  Save this paper

Evidence from a Natural Experiment on the Development Impact of Windfall Gains: The Camisea Fund in Peru

Author

Listed:
  • Corral, Leonardo
  • Henderson, Heath
  • Miranda, Juan José

Abstract

This document studies the economic effect of windfall gains by examining a Peruvian natural experiment. The Camisea Fund for Socioeconomic Development (FOCAM) is an inter-governmental fiscal transfer scheme that allocates natural gas royalties generated by the Camisea Gas Project to eligible subnational governments. We exploit the rules governing FOCAM allocation to identify the effect of the transfers on municipal accounts, local infrastructure, and economic development. Using a newly constructed district- level dataset for the years 2005 and 2012, we find evidence of positive impacts on municipal capital expenditures and local infrastructure. However, we also find evidence of a negative impact on municipal current expenditures. More specifically, we find that municipalities with low absorptive capacity coped with the increased administrative burden of FOCAM transfers by reallocating administrative effort toward (away from) executing capital (current) expenditures.

Suggested Citation

  • Corral, Leonardo & Henderson, Heath & Miranda, Juan José, 2016. "Evidence from a Natural Experiment on the Development Impact of Windfall Gains: The Camisea Fund in Peru," IDB Publications (Working Papers) 7520, Inter-American Development Bank.
    • Handle: RePEc:idb:brikps:7520
    as

    Download full text from publisher

    File URL: https://publications.iadb.org/publications/english/document/Evidence-from-a-Natural-Experiment-on-the-Development-Impact-of-Windfall-Gains-The-Camisea-Fund-in-Peru.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Brunnschweiler, Christa N. & Bulte, Erwin H., 2008. "The resource curse revisited and revised: A tale of paradoxes and red herrings," Journal of Environmental Economics and Management, Elsevier, vol. 55(3), pages 248-264, May.
    2. Joshua D. Angrist & Adriana D. Kugler, 2008. "Rural Windfall or a New Resource Curse? Coca, Income, and Civil Conflict in Colombia," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 191-215, May.
    3. Jeffrey D. Sachs & Andrew M. Warner, 1995. "Natural Resource Abundance and Economic Growth," NBER Working Papers 5398, National Bureau of Economic Research, Inc.
    4. Oeindrila Dube & Juan F. Vargas, 2013. "Commodity Price Shocks and Civil Conflict: Evidence from Colombia," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 80(4), pages 1384-1421.
    5. Fernanda Brollo & Tommaso Nannicini & Roberto Perotti & Guido Tabellini, 2013. "The Political Resource Curse," American Economic Review, American Economic Association, vol. 103(5), pages 1759-1796, August.
    6. Stelios Michalopoulos & Elias Papaioannou, 2013. "Pre‐Colonial Ethnic Institutions and Contemporary African Development," Econometrica, Econometric Society, vol. 81(1), pages 113-152, January.
    7. Carl-Johan Dalgaard & Ola Olsson, 0. "Windfall Gains, Political Economy and Economic Development," Journal of African Economies, Centre for the Study of African Economies, vol. 17(suppl_1), pages -109.
    8. David Dollar & Craig Burnside, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September.
    9. Matthew Blackwell & Stefano Iacus & Gary King & Giuseppe Porro, 2009. "cem: Coarsened exact matching in Stata," Stata Journal, StataCorp LP, vol. 9(4), pages 524-546, December.
    10. Norman V. Loayza & Jamele Rigolini & Oscar Calvo-González, 2014. "More Than You Can Handle: Decentralization and Spending Ability of Peruvian Municipalities," Economics and Politics, Wiley Blackwell, vol. 26(1), pages 56-78, March.
    11. Hansen, Henrik & Tarp, Finn, 2001. "Aid and growth regressions," Journal of Development Economics, Elsevier, vol. 64(2), pages 547-570, April.
    12. Iacus, Stefano M. & King, Gary & Porro, Giuseppe, 2011. "Multivariate Matching Methods That Are Monotonic Imbalance Bounding," Journal of the American Statistical Association, American Statistical Association, vol. 106(493), pages 345-361.
    13. Lucie Gadenne & Monica Singhal, 2014. "Decentralization in Developing Economies," Annual Review of Economics, Annual Reviews, vol. 6(1), pages 581-604, August.
    14. Raghuram G. Rajan & Arvind Subramanian, 2008. "Aid and Growth: What Does the Cross-Country Evidence Really Show?," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 643-665, November.
    15. Francesco Caselli & Guy Michaels, 2013. "Do Oil Windfalls Improve Living Standards? Evidence from Brazil," American Economic Journal: Applied Economics, American Economic Association, vol. 5(1), pages 208-238, January.
    16. de Mello, Luiz Jr, 2000. "Fiscal Decentralization and Intergovernmental Fiscal Relations: A Cross-Country Analysis," World Development, Elsevier, vol. 28(2), pages 365-380, February.
    17. Vicente, Pedro C., 2010. "Does oil corrupt? Evidence from a natural experiment in West Africa," Journal of Development Economics, Elsevier, vol. 92(1), pages 28-38, May.
    18. J. Vernon Henderson & Adam Storeygard & David N. Weil, 2012. "Measuring Economic Growth from Outer Space," American Economic Review, American Economic Association, vol. 102(2), pages 994-1028, April.
    19. Guido W. Imbens & Jeffrey M. Wooldridge, 2009. "Recent Developments in the Econometrics of Program Evaluation," Journal of Economic Literature, American Economic Association, vol. 47(1), pages 5-86, March.
    20. Meyer, Bruce D, 1995. "Natural and Quasi-experiments in Economics," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(2), pages 151-161, April.
    21. Sascha O. Becker & Peter H. Egger & Maximilian von Ehrlich, 2013. "Absorptive Capacity and the Growth and Investment Effects of Regional Transfers: A Regression Discontinuity Design with Heterogeneous Treatment Effects," American Economic Journal: Economic Policy, American Economic Association, vol. 5(4), pages 29-77, November.
    22. Iacus, Stefano & King, Gary & Porro, Giuseppe, 2009. "cem: Software for Coarsened Exact Matching," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 30(i09).
    23. Arzaghi, Mohammad & Henderson, J. Vernon, 2005. "Why countries are fiscally decentralizing," Journal of Public Economics, Elsevier, vol. 89(7), pages 1157-1189, July.
    24. Samuel Bazzi & Michael A. Clemens, 2013. "Blunt Instruments: Avoiding Common Pitfalls in Identifying the Causes of Economic Growth," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(2), pages 152-186, April.
    25. Bird, Richard M., 1993. "Threading the Fiscal Labyrinth: Some Issues in Fiscal Decentralization," National Tax Journal, National Tax Association;National Tax Journal, vol. 46(2), pages 207-227, June.
    26. Iacus, Stefano M. & King, Gary & Porro, Giuseppe, 2012. "Causal Inference without Balance Checking: Coarsened Exact Matching," Political Analysis, Cambridge University Press, vol. 20(1), pages 1-24, January.
    27. Bird, Richard M. & Smart, Michael, 2002. "Intergovernmental Fiscal Transfers: International Lessons for Developing Countries," World Development, Elsevier, vol. 30(6), pages 899-912, June.
    28. King, Gary & Zeng, Langche, 2006. "The Dangers of Extreme Counterfactuals," Political Analysis, Cambridge University Press, vol. 14(2), pages 131-159, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nemera Gebeyehu Mamo, 2018. "Essays on natural resources in Africa: local economic development, multi-ethnic coalitions and armed conflict," Economics PhD Theses 0518, Department of Economics, University of Sussex Business School.
    2. Frederick van der Ploeg, 2011. "Natural Resources: Curse or Blessing?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 366-420, June.
    3. Juergen Bitzer & Erkan Goeren, 2018. "Foreign Aid and Subnational Development: A Grid Cell Analysis," Working Papers V-407-18, University of Oldenburg, Department of Economics, revised Mar 2018.
    4. Maldonado, Stanislao, 2014. "The Non-Monotonic Political Effects of Resource Booms," MPRA Paper 85649, University Library of Munich, Germany, revised 18 Dec 2017.
    5. Traviss Cassidy, 2019. "The Long-Run Effects of Oil Wealth on Development: Evidence from Petroleum Geology," The Economic Journal, Royal Economic Society, vol. 129(623), pages 2745-2778.
    6. Gallego, Jorge & Maldonado, Stanislao & Trujillo, Lorena, 2020. "From curse to blessing? institutional reform and resource booms in Colombia," Journal of Economic Behavior & Organization, Elsevier, vol. 178(C), pages 174-193.
    7. Stanislao Maldonado & Martin Ardanaz, 2023. "Natural resource windfalls and efficiency in local government expenditure: Evidence from Peru," Economics and Politics, Wiley Blackwell, vol. 35(1), pages 28-64, March.
    8. Leduc, Elisabeth & Tojerow, Ilan, 2020. "Subsidizing Domestic Services as a Tool to Fight Unemployment: Effectiveness and Hidden Costs," IZA Discussion Papers 13544, Institute of Labor Economics (IZA).
    9. James Cust & Torfinn Harding & Pierre-Louis Vézina, 2019. "Dutch Disease Resistance: Evidence from Indonesian Firms," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 6(6), pages 1205-1237.
    10. Jorge Gallego & Stanislao Maldonado & Lorena Trujillo, 2018. "Blessing a Curse? Institutional Reform and Resource Booms in Colombia," Working Papers 122, Peruvian Economic Association.
    11. Francesco Caselli & Guy Michaels, 2013. "Do Oil Windfalls Improve Living Standards? Evidence from Brazil," American Economic Journal: Applied Economics, American Economic Association, vol. 5(1), pages 208-238, January.
    12. Addison,Tony & Boly,Amadou & Mveyange,Anthony Francis, 2017. "The impact of mining on spatial inequality recent evidence from Africa," Policy Research Working Paper Series 7960, The World Bank.
    13. Armey, Laura E. & McNab, Robert M., 2018. "Expenditure decentralization and natural resources," The Quarterly Review of Economics and Finance, Elsevier, vol. 70(C), pages 52-61.
    14. Minasyan, Anna & Nunnenkamp, Peter & Richert, Katharina, 2017. "Does Aid Effectiveness Depend on the Quality of Donors?," World Development, Elsevier, vol. 100(C), pages 16-30.
    15. Ramboer, Sander & Reynaerts, Jo, 2020. "Indecent proposals: Estimating the impact of regional state aid through EU guideline compliance," Regional Science and Urban Economics, Elsevier, vol. 82(C).
    16. Arinze Nwokolo, 2018. "Oil Price Shocks and Civil Conflict: Evidence from Nigeria," HiCN Working Papers 274, Households in Conflict Network.
    17. Augusto Cerqua & Guido Pellegrini, 2017. "Industrial policy evaluation in the presence of spillovers," Small Business Economics, Springer, vol. 49(3), pages 671-686, October.
    18. Addison,Tony & Boly,Amadou & Mveyange,Anthony Francis, 2017. "The impact of mining on spatial inequality recent evidence from Africa," Policy Research Working Paper Series 7960, The World Bank.
    19. McGuirk,Eoin & Rajaram,Anand & Giugale,Marcelo, 2016. "The political economy of direct dividend transfers in resource-rich countries : a theoretical consideration," Policy Research Working Paper Series 7575, The World Bank.
    20. Tiago Cavalcanti & Daniel Mata & Frederik Toscani, 2019. "Winning the oil lottery: the impact of natural resource extraction on growth," Journal of Economic Growth, Springer, vol. 24(1), pages 79-115, March.

    More about this item

    Keywords

    Natural gas royalties; Municipal Expenditure; Local infrastructure;
    All these keywords.

    JEL classification:

    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:idb:brikps:7520. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Felipe Herrera Library (email available below). General contact details of provider: https://edirc.repec.org/data/iadbbus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.