Reversing the Resource Curse: Foreign Corruption Regulation and Economic Development

66 Pages Posted: 19 Oct 2020

See all articles by Hans Christensen

Hans Christensen

University of Chicago - Booth School of Business

Mark G. Maffett

University of Chicago - Booth School of Business

Thomas Rauter

University of Chicago - Booth School of Business

Date Written: October 16, 2020

Abstract

We examine the impact of foreign corruption regulation on economic development in high- corruption-risk areas. We find that, after a mid-2000s increase in enforcement of the US Foreign Corrupt Practices Act (FCPA), economic activity (measured by nighttime luminosity) in African communities within a 50-kilometer radius of natural resource extraction facilities subject to the FCPA increases by 8%. Local perceptions of corruption also significantly decline. Consistent with the increase in economic activity being driven, at least in part, by existing extraction firms shifting to business practices that are more beneficial to the local communities where they operate, the association between resource production and local economic activity increases by 37%. Overall, our findings suggest that anti-corruption regulation originating in developed countries is effective in changing corporate behavior and has a positive economic impact in developing countries.

Keywords: Foreign Corruption Regulation; Foreign Corrupt Practices Act (FCPA); Economic Development; Natural Resource Extraction

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

Suggested Citation

Christensen, Hans and Maffett, Mark G. and Rauter, Thomas, Reversing the Resource Curse: Foreign Corruption Regulation and Economic Development (October 16, 2020). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2020-155, Available at SSRN: https://ssrn.com/abstract=3714027 or http://dx.doi.org/10.2139/ssrn.3714027

Hans Christensen

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Mark G. Maffett

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Thomas Rauter (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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