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dc.contributor.authorPerez-Sebastian, F.
dc.contributor.authorRaveh, Ohad
dc.identifier.citationPerez-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.publisherElsevier BV
dc.titleNatural resources, decentralization, and risk sharing: Can resource booms unify nations?
dc.typeJournal Article
dcterms.source.titleJournal of Development Economics
curtin.accessStatusFulltext not available

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