Explaining the Heterogeneous Effects of Natural Resources on Local Economic Development

Abstract

This article investigates whether natural resource booms can have heterogeneous effects on local development, depending on the type of resource studied. I employ satellite light data for Colombia and exploit the effects of international price shocks in municipalities with preexisting reserves of gold, coal, and oil. I find that gold and oil producing municipalities see higher light and migration following a price increase relative to the other municipalities. These areas also see a deterioration in socioeconomic outcomes and firm performance in the non-mining sector. The opposite effects are observed for the case of coal.

Keywords: Natural resources, local economic development, crime

JEL Classification: O13, O43, Q34, R11