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Faculty of Economics

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Cavalcanti, T. V. D., Da Mata, D. and Toscani, F.

Winning the Oil Lottery: The Impact of Natural Resource Extraction on Growth

CWPE1455

Abstract: This paper provides evidence on the causal impact of oil discoveries on local development. Novel data on the drilling of 20,000 oil wells in Brazil allows us to exploit a quasi-experiment: municipalities where oil was discovered constitute the treatment group while municipalities with drilling but no discovery are the control group. The results show that oil discoveries significantly increase per capita GDP and urbanization. We find positive spillovers to non-oil sectors, specifically an increase in services GDP which stems from higher labor productivity. The results are consistent with greater local demand for non-tradable services driven by highly paid oil workers.

Keywords: Petroleum Industry, Economic Growth, Urbanization

JEL Codes: O13 O40

Author links: Tiago Cavalcanti  

PDF: http://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe1455.pdf

Open Access Link: https://doi.org/10.17863/CAM.5671