Natural resources, decentralization, and risk sharing: Can resource booms unify nations?
|dc.identifier.citation||Perez-Sebastian, F. and Raveh, O. 2016. Natural resources, decentralization, and risk sharing: Can resource booms unify nations?. Journal of Development Economics. 121: pp. 38-55.|
© 2016 Elsevier B.V.Previous studies imply that a positive regional fiscal shock, such as a resource boom, strengthens the desire for separation. In this paper we present a new and opposite perspective. We construct a model of endogenous fiscal decentralization that builds on two key notions: a trade-off between risk sharing and heterogeneity, and a positive association between resource booms and risk. The model shows that a resource windfall causes the nation to centralize as a mechanism to either share risk and/or prevent local capture, depending on the relative bargaining power of the central and regional governments. We provide cross country empirical evidence for the main hypotheses, finding that resource booms: (i) decrease the level of fiscal decentralization with no U-shaped patterns, (ii) cause the former due to risk sharing incentives primarily when regional governments are relatively strong, and (iii) have no effect on political decentralization.
|dc.title||Natural resources, decentralization, and risk sharing: Can resource booms unify nations?|
|dcterms.source.title||Journal of Development Economics|
|curtin.accessStatus||Fulltext not available|
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