Essays on development and resource economics

  • Aufsätze zur Entwicklungs- und Ressourcenökonomie

Endrikat, Morten; Lorz, Jens Oliver (Thesis advisor); Balleer, Almut (Thesis advisor)

Aachen : RWTH Aachen University (2020, 2021)
Dissertation / PhD Thesis

Dissertation, Rheinisch-Westfälische Technische Hochschule Aachen, 2020

Abstract

This dissertation, which consists of three essays, can be separated into two main topics and is embedded in the research field of development and resource economics. The first topic, which is covered by the first two essays, deals with the question of whether rents from natural resources, such as oil, gas, and minerals, influence the decisions of governments and of whether the potential effects differ between democratic and autocratic countries. The first two essays therefore contribute to the literature on the so-called resource curse, a term that describes the empirical observation that countries that are rich in natural resources are often economically less developed than countries that are rather scarce in these resources. In particular, the first essay tackles the question of whether these rents influence the process of economic liberalization and how the degree of democracy moderates this effect. First, a theoretical model investigates the incentives that autocratic regimes may have to prevent an economically independent middle class from emerging among the citizens. The model assumes that an economically independent middle class on the one hand leads to higher tax revenues for the regime, but on the other hand enhances the pursuit for political participation among the citizens, which threatens the power of an autocratic regime. High revenues from exploiting natural resources alleviate the need of the regime to tax the citizens and hence lower the opportunity costs of high entry barriers. This, in turn, may impede the process of economic liberalization. Whilst the theoretical model does not find indications that natural resource rents lead to higher levels of market entry barriers in autocratic countries, the following regression analyses provide statistically robust evidence for the existence of such an effect, which is qualitatively in line with several other observations in the literature on a potential resource curse.The regression analyses of the second essay enhance the evidence that natural resource rents may distort the incentives of autocratic regimes, as it shows that these rents may affect the composition of government spending in autocratic countries. In detail, the results suggest that resource rents in combination with autocratic structures may lead to significantly lower spending on education. Moreover, there is weak evidence for increased social spending in resource rich autocracies, whereas the analyses do not find any significant effect on other types of government spending. In particular, there is no hint that supports the hypothesis of resource rich autocracies spending, ceteris paribus, more on military purposes. The third essay deals with the issue of how prosperity and economic development should be defined in general and argues that most of the common welfare measures assign no or too little weight to environmental aspects. The essay extends and calibrates an existing welfare measure, which is based on microeconomic concepts, by a component of air quality, specifically the exposure to particulate matter. By doing so, it can be shown that the average increases in income, which many emerging countries have experienced in the recent past and which in many cases came at the expense of a degradation of the air quality, lead to an overestimation of the actual improvements in welfare of these countries. Moreover, it can be demonstrated that severe levels of air pollution also relativize the high living standards in many high developed countries especially in Europe, even though most of these countries have achieved remarkable improvements in air quality over the last three decades. Taking into consideration that the exploitation of natural resources often causes massive environmental damages, links the first two essays of this dissertation to the third, since the results of the latter suggest that the potential negative effects of resource abundance may be even more severe in many countries than found by studies that mainly focus on the monetary aspects of the resource curse.

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