Natural Resource Rents, Local Taxes, and Government Performance: Colombia
Rigorous empirical evidence that natural-resource rents reduce local tax effort and weaken government accountability — the 'resource curse' at the local level.
Summary
This 2018 study by Luis Martinez uses Colombian data to test how natural-resource rents affect local government behaviour — a question central to whether resource rents should be captured centrally and distributed rather than left to flow unconditionally.
Key Finding
Municipalities receiving large resource-rent transfers exhibit lower tax effort and weaker accountability — the local "resource curse." When unearned resource revenue arrives without the fiscal discipline of taxation, governance suffers. The finding supports the Georgist/ecological argument for capturing resource rent transparently and ideally returning it as a citizen's dividend (as Alaska does) rather than as opaque transfers.
Bears On
- Concept: Resource Rents
- Outcome: Capturing resource rent works — where institutions are strong — the contrapositive: rents captured without institutional discipline weaken governance, showing the institutional channel is decisive.
- Outcome: Resource-rent dividends are workable and durable
Sources
- Luis Martinez (2018), "Natural Resource Rents, Local Taxes, and Government Performance: Evidence from Colombia," SSRN — used for the counter-case on resource rents: windfall oil/mineral transfers to Colombian municipalities were associated with worse governance and possible capture, versus revenue raised via local taxes. Paper