Cursed by local institutions? An analysis of the role of institutions in the effects of natural resource abundance on the provision of public goods: evidence from peruvian municipalities
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After decades of research, there is still no consensus in the literature regarding the effects of natural resource abundance on the economic and political performance of a territory. This research aims to contribute to this discussion, by analyzing the role of institutions on explaining the relationship between natural resource-based revenues and the provision of public goods at the local level. In order to do so, I test the mechanisms previously proposed in the literature for explaining the natural resource curse effect at the national level (mediation and moderation effects of institutional quality), using cross-sectional data of Peruvian municipalities located in the Andean highlands, for the 2011-2014 period. The identification strategy proposed uses as source of exogenous variation for revenues, the location of natural resources and its value among the territory, and a set of rules established by law for the redistribution of natural resource-based revenues to the local governments. In order to deal with the endogeneity of institutional quality, I include 2SLS estimations, using the presence of 'Peasant Communities' (Comunidades Campesinas) as an instrumental variable. The results show some evidence of a positive effect of natural resource-based revenues on the provision of local public infrastructure (water, public lightning and rural roads), a null effect on education results, and a negative effect on health campaigns. However, regarding the role of institutional quality on explaining these effects, I find no significant effects for all of the outcomes and samples analyzed.