Expenditure decentralization and natural resources

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Authors
Armey, Laura
McNabb, Robert M.
Subjects
Fiscal decentralization
Natural resources
GMM
LSDVC
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Date of Issue
2018
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Elsevier
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Abstract
This paper explores the relationship between natural resource revenues and expenditure decentralization. While the literature suggests that an abundance of natural resources may have deleterious effects on fiscal decentralization and other variables, existing empirical evidence regarding expenditure decentral- ization is scant and suspect. We find that expenditure decentralization is highly persistent. We take this persistence into account and use four different estimation strategies to examine whether natural resource revenues influence expenditure decentralization. Increases in natural resource rents as a percentage of Gross Domestic Product (GDP) statistically significantly and negatively affect expenditure decentralization. A 1% year-on-year increase in natural resource rents reduces estimated expenditure decentralization by approximately 0.1% to 0.3%. This result is robust to an alternative measure of resource dependence. Our findings strongly suggest that increases in resource endowments lead to a centralization of government expenditures.
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Article
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The article of record as published may be found at https://doi.org/10.1016/j.qref.2018.05.015
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https://hdl.handle.net/10945/66807
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10 p.
Citation
Armey, Laura E., and Robert M. McNab. "Expenditure decentralization and natural resources." The Quarterly Review of Economics and Finance 70 (2018): 52-61.
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This publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.
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