People who study countries that suffer from an abundance of resources, whether you call it The Dutch Disease, The Devil’s Excrement or the curse of abundant resources, spend a lot of time trying to compare countries which sometimes have many social, cultural or even religious differences that lead some to question whether a comparison is appropriate. A couple of Professors at the London School of Economics have done a very ingenious study in Brazil, which appears to show that The Devil’s Excrement is at work at a more micro level in a single country, where cultural and social differences are limited.
What they did was go to Brazil where municipalities apparently benefit directly from their oil wealth (I was not aware of this), creating municipalities with different levels of oil income, but despite these they do not show any significant differences with other municipal characteristics.
What is available on-line does not talk much about methodology, but the authors conclude that oil production has no impact on non-oil activities and more remarkably, when onshore oil contributes to the economy of the municipality, the manufacturing sector shrinks and the service sector expands in that municipality (Sound Familiar?)
While the authors do find that richer municipalities spend more and build more infrastructure, when they look at actual quality of life increases, there are few. For example, there are minimal increases in household income, but this has nothing to do with increased population, for example.
However, the study finds where some of this money may have gone, such as the homes of municipal worker houses increasing in size, more news about corruption cases from the municipality, a higher number of Federal poliec actions in the area and anecdotal cases of corruption involving the Mayors of oil rich areas.
The authors also find that other sources of revenues do have a larger impact and less “missing money”.The only thing I was not clear about is how municipalities with more infrastructure thanks to oil don’t ahev a higher standard of living, but overall I found the paper and many of the references aboyt Venezuela’s disease, quite interesting. I hope you do too.
I guess the curse is hard to get rid off. Maybe this is our solution as a country and I am not kidding.