Reversing the Resource Curse: Foreign Corruption Regulation and the Local Economic Benefits of Resource Extraction

Abstract

We examine how foreign corruption regulation affects the economic benefits communities receive from extraction activities in resource-rich areas of Africa. After a mid-2000s increase in enforcement of the US Foreign Corrupt Practices Act (FCPA), nighttime luminosity increases by 15% (5%) in communities within a 10-(25-) kilometer radius of affected extraction facilities. Cash-wage employment also increases significantly, suggesting that the economic benefits are not limited to electricity access. Consistent with foreign corruption regulation mitigating the political resource curse, we find that perceived corruption decreases following the rise in FCPA enforcement.

Keywords: Foreign Corruption Regulation; Foreign Corrupt Practices Act (FCPA); Natural Resource Extraction; Nighttime Luminosity; Governance

JEL Classification: F50; F60; K2; M4; O1