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Resource Extraction, Revenue Sharing, and Growth

Author

Listed:
  • Brehm, Margaret E.
  • Brehm, Paul A.
  • Cassidy, Alecia
  • Cassidy, Traviss

Abstract

We examine the economic impacts of natural resource revenue-sharing systems, where central governments transfer a portion of resource revenue to producing regions. Using a natural experiment in Indonesia, we separately identify the effects of shared revenue and resource extraction. Contrary to Dutch disease concerns, shared oil and gas revenue does not harm local manufacturing firms, while extraction promotes manufacturing growth. Both extraction and shared revenue significantly raise local non-oil GDP. We find suggestive evidence of larger gains from shared revenue in areas without onshore extraction, implying central governments could improve aggregate welfare by channeling more resource revenue toward resource-poor areas.

Suggested Citation

  • Brehm, Margaret E. & Brehm, Paul A. & Cassidy, Alecia & Cassidy, Traviss, 2024. "Resource Extraction, Revenue Sharing, and Growth," MPRA Paper 121428, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:121428
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    File URL: https://mpra.ub.uni-muenchen.de/121428/1/MPRA_paper_121428.pdf
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    More about this item

    Keywords

    Growth; resource booms; decentralization; manufacturing firms; Indonesia; Dutch disease;
    All these keywords.

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)

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