Three Essays on Natural Resource Exploitations and Negative Social Externalities

  • Jubril Animashaun

Student thesis: Unknown

Abstract

This three-essay thesis provides a critical analysis of the resource curse in oil-rich countries. We provide insights on the resource curse in oil-rich countries by drawing on historical legacies of colonisation and information asymmetry with citizens’ ability to ascertain resource-rich governments’ revenue allocation priorities to understand the resource curse. These approaches help to identify and address some gaps in the empirical and theoretical literature on the resource curse and to specify policy interventions that can enhance the potential benefits from oil and gas endowments for socio-economic development. In the first essay, our central hypothesis relates the resource curse to the inherited institutional framework that goes back to the 16th-19th century European-organised mercantilism. We test the conditional institution-resource curse hypothesis using an IV-GMM model and examine how the experience of European colonisation indirectly reinforces resource curse in 69 (40 colonised and 29 non-colonised) oil-rich countries with at least one discovery of giant oil reserves from 1960-2015. We instrument the unweighted institutional index (drawn from averages of executive constraints, protection against expropriation risk and government effectiveness) with a dummy for colonial experience, and the giant oil and gas abundance with the log of the depth and depth (squared) of oil and gas fields to account for the endogeneities in oil and gas exploration activities. We measure the European colonial experience with a dummy variable and define colonial experience with evidence of data on settlers’ mortality and/or the persistence of any European language as the official language in non-European oil-rich countries. This approach helps to reduce measurement error by identifying the colonisation experience and for categorising oil-rich countries based on the experience of economically exploitative colonialism. Our findings show that oil-countries without the experience of European colonisation have better institutional quality and can reverse resource curse, whereas, countries with exploitative colonial experience cannot. Given the plausible abuses associated with 16th-19th century colonial heritage and the festering effect it has on the institution-resource curse theory, to reverse resource curse, we propose investing rents on the identified inherited structures from colonialisation that make institutional reforms and good governance challenging in colonised countries. Such involves prioritising investment in human capital development, quality education, and building social trust and civic responsibilities across ethnic groups and between citizens and the government. In the second essay, we explore the resource curse by focusing on how shocks to income translate to improvement in child health in oil-rich countries with oil and gas discoveries. We condition income per capita on shocks from time-series variation in global oil-prices interacted with longitudinal variation in oil discoveries and a dummy to capture if a country was a European colony during the 16th to 19th-century European colonialism. Child health is a robust marker of socioeconomic status, and an improved understanding in oil-rich countries could prove useful for understanding another channel of the resource curse. If the positive shock to income (oil-price shocks given oil discoveries) is compromised by the inefficiency with revenue allocation and management (e.g., the resource curse and/or the enduring impact of the 16th to 19th-century European colonialism), the effect of positive shocks on income might not translate to an improvement in health outcomes especially, those aimed at reducing child mortality. We use a 2-stage Fixed Effect (FE) Instrumental variable (IV) strategy to estimate the causal effect of aggregate GDP per capita on child mortality per 1,000 births in 99 oil-rich countries from 1960 to 2010. Conditional on the instrumental variables, we find
Date of Award1 Aug 2020
Original languageEnglish
Awarding Institution
  • The University of Manchester
SupervisorAda Wossink (Supervisor) & Ron Chan (Supervisor)

Keywords

  • GDP bias
  • Nighttime lights
  • Colonial heritage
  • Political resource curse
  • Child mortality

Cite this

'