Abstract
This article analyses the relation between mineral rents and development outcomes at the subnational level. The classical literature suggests that natural resource abundance has negative effects on well-being, a situation referred to as the resource curse. However, a novel strand of research emphasizes that rentier states worldwide exhibit contrasting outcomes. To account for such variation, this investigation aligns with approaches stressing the significance of contextual (place and institutional) factors to studying the resource curse. The main claim in this work is that both structural and institutional factors related to the extractive industry help account for variation in development outcomes. It contends that mineral rents are positively associated with human development and economic industrialization when the extractive sector is not geographically concentrated in enclave economies, and subnational fiscal institutions redistribute enough rents from producing to non-producing districts. It empirically tests this argument using a time series cross-sectional analysis, a difference-in-difference (DiD) estimation, and two case studies in Argentina, a country where subnational territorial units collect mineral royalties and have exogenously created their own rent-sharing regimes. It finally provides some comparative implications that may contribute to current debates on the socioeconomic impact of natural resource wealth.
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Notes
In a piece closely related to our concerns here, Díaz-Rioseco (2016) studies the political impact (i.e., level of political contestation) of these fiscal institutions in Argentina.
Yet Postali and Nishijima (2013) demonstrate that rents distributed under the new rules had positive impacts on illiteracy and access urban services.
The provision of public education and health in Argentina was decentralized to the provinces in the late 1970s and early 1990s. Although municipal governments are not in charge of delivering these services, they run basic health care centers and kindergartens, and play a key role in providing access to running water, waste collection, sanitation, and housing. In addition, mayors are crucial in pressuring provincial governments to build schools, health facilities, and urban infrastructure in their districts. During the national administrations of Néstor Kirchner and the first presidency of Cristina Fernández de Kirchner (2003–2011), the central government increased substantially the amount of investment in public works transferred to municipalities in an attempt to build territorial power with local leaders, bypassing governors (Lodola 2011: 222). Thus, mayors became involved in deciding how to spend some of these sizeable resources.
A notable exception is Díaz-Rioseco (2016).
The Breusch-Pagan/Cook-Weisberg test and a scatterplot for the error term indicate that there is heteroskedasticity, particularly in model 2. The Wooldridge test reports autocorrelation in the panel data. The VIF indicates there is no serious collinearity among our key independent variables.
The inclusion of fixed effects also reduces degrees of freedom, which is particularly sensible in small panel data like that used in this article.
These data are from the National Institute of Statistics and Censuses (INDEC) and cover the 1996–2010 period.
Data for the 1993–2013 period were made available by the Directorate for the Analysis of Public Expenditure and Social Programs, and the National Direction for Fiscal Coordination with the Provinces, Ministry of Economy.
Congress, though, regulates royalties through specific laws. The Hydrocarbons Law, enacted in 1967, and its 2014 amendments (Law 27,007) establish that concessionaires should pay monthly rents to the provinces up to 12% of the hydrocarbons extracted at the wellhead. The federal government can reduce this amount up to 5% depending on productivity.
Furthermore, measuring mineral rents by flows of resource exports is an outcome variable in its own right, and therefore not completely exogenous (Dunning 2008).
Official data in Argentina do not distinguish among different sources of mineral rents. This limitation, however, is not a major concern here because mining provinces are not oil and gas producers, and hydrocarbon provinces have marginal mining sectors, except for Santa Cruz, where mining represents 15% of total revenues (CAEM 2015).
Our variable of political competition highly correlates with both the opposition share of the votes and the margin of victory in state executive contests. So that our results do not change if we employ these indicators. We also run alternative models including a dummy variable to capture president-governor political alignment. This variable never reaches statistical significance while the main results remain unchanged.
Mineral rents more than tripled in producing provinces, skyrocketing from an average of 11% of the provincial budget in 1998 to 36% in 2002.
Neuquén, however, doubles Santa Cruz in the number of municipalities: 35 versus 15. It also organizes municipalities in three categories according to their population. Only those in the first category enact their own constitutions, while those in the third do not elect mayors but a gubernatorial council. The three of them have the same constrains over the use of mineral revenues transferred from the provincial government.
On average, life expectancy at birth in Santa Cruz is around 2 years lower than in Neuquén (74.1 versus 76.3), with the difference increasing after the oil boom in almost 1 year. Gross income per capita (in dollars) is also consistently lower (around 40%) in Santa Cruz. However, this province performs slightly better in adult literacy (98.8 versus 97.4%), and education enrollment (95.8 versus 94.6%), mainly due to higher dropout at secondary school in Neuquén. It is worth noting that after the oil windfall school enrollment improved in Neuquén proportionally more than it did it in Santa Cruz.
Natural gas, which is transported through pipelines to Chile and Argentina’s central region, is exploited by YPF (25%), and the private firms Compañía General de Combustibles (27), Sinopec (21), and Enap Sipetrol (13).
Unfortunately, there are not data on HDI at the municipal level in Argentina. We employ welfare data on producing areas—e.g., urban infrastructure, poverty, housing—that can arguably be considered factors connected to the welfare indicators in the HDI.
The other economic activities, which are not adequately modernized and contribute little to the region’s economic output, are sheep and goat livestock, wool, and tourism.
Population grew at an annual rate of 5.5% between 1970 and 2010, and 7.5% since then.
Añelo’s mayor, Darío Díaz, confirmed these sectoral and citizens’ pressures for more and better public services in town (Interview, April 2016).
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Acknowledgements
Funding for this project was provided by the Targeted Research Projects (Proyectos de Investigación Orientados, PIO) CONICET - YPF 2015-2016, PIP133 201401 00022 CO. We conducted fieldwork for this project in the provinces of Neuquén (April 2016), Mendoza (August 2016), Chubut (October2016), Río Negro (November 2016), Santa Cruz (September 2017), and Tierra del Fuego (December 2017). We thankfully acknowledge the helpfulcomments of Diego Díaz Rioseco, Kent Eaton, Juan Gutiérrez-Rodríguez, Juan Pablo Luna, Osmel Manzano, Sebastián Mazzuca, José Carlos Orihuela,Richard Snyder, and the participants at the XXXVI International Congress of the Latin American Studies Association (LASA), Barcelona, May 22-25, 2018;the Research Seminar Center for Latin American and Caribbean Studies, Watson Institute for International and Public Affairs, Brown University, April 5,2018; the Workshop on Sub-National Politics in Latin America, Pontificia Universidad Católica de Chile, Santiago, Chile, November 30-December 1, 2017;and the XXXV International Congress of the Latin American Studies Association, Lima, Peru, April 29-May 1, 2017. We also thank Belén Cáceres, RocíoMoris, and Julieta Casas who provided crucial research assistance for this project, and the personnel from the provincial ministries and public offices fortheir interviews and help in getting access to data and information. Any mistake is the sole responsibility of the authors.
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González, L.I., Lodola, G. The Impact of Oil Rents on Subnational Development: Evidence from Argentina. St Comp Int Dev 54, 550–570 (2019). https://doi.org/10.1007/s12116-019-09293-2
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DOI: https://doi.org/10.1007/s12116-019-09293-2