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 US Foreign Corrupt Practices Act (FCPA) enforcement, nighttime luminosity increases by 15% (5%) in communities within a 10-(25-) kilometer radius of affected extraction facilities. Cash-wage employment increases by 22%, 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 and that the pass-through from global commodity prices to luminosity increases following the rise in FCPA enforcement.

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

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