How do Natural Resource Rents Affect Government Spending Allocation?

Undergraduate Honors Thesis

Citations

Citeable URL: https://scholar.colorado.edu/concern/undergraduate_honors_theses/rv042t612

Abstract

This paper examines the effects of natural resource rents on Government Spending Allocation. I also analyze the role of election cycle, political ideology, and institutional quality in mitigating or exacerbating these effects. In order to do that, I run a panel data regression at the country level using a data set of 191 countries between 1970 and 2016. I use total natural resource rents, specific types of natural resource rents (oil, gas, coal, mineral, and forest rents), and several categories of government spending (military, subsidies, and education). In order to compare them, I create interaction terms for election cycle, party ideology, and institutional quality. The results suggest that the effects of natural resource rents on government spending varies mainly among countries political ideology and type of natural resource rent. Furthermore, elections increase the effects of a natural resource rents on government spending, and institutional quality has a negative impact on the relationship between forest rents and subsidies spending.

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