The Natural Resource Curse and Fiscal Decentralization

May 2013 | 112

Authors: Fidel Perez-Sebastian, Ohad Raveh

Natural resource abundance is a blessing for some countries, but a curse for others. We show that differences across countries in the degree of fiscal decentralization can contribute to this divergent outcome. Using a large panel of countries, covering several decades and various fiscal decentralization and natural resource measures, we provide empirical support for the novel hypothesis. We also study a model that combines political and market mechanisms, under a unified framework, to illustrate how natural resource booms may create negative effects in fiscally decentralized nations.

JEL Codes: Q32, Q33, O13, O18, H77

Keywords: Natural resources, economic growth, …scal decentralization

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