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Wessel Vermeulen
Wessel Vermeulen

Lecturer in Economics at Newcastle University, since September 2016, working on environmental economics, public economics, institutions, trade and conflict studies

Since July 2020 at OECD Trento Centre, working on spatial productivity.

Last update: 28 August 2020.

Short CV

  • Junior Economist: OECD Trento Centre ('20-present)
  • Lecturer: Newcastle University ('16-present)
  • Post-doc: OxCARRE, University of Oxford ('13-'16)
  • PhD Economics: University of Luxembourg ('09-'13)
  • MSc Financial Economics: Maastricht University ('07-'08)
  • BSc Economics: Maastricht University ('04-'07)
Long CV (pdf)

"Electric Vehicle Incentive Policies in Canadian Provinces", Energy Economics, 2020, Volume 91, with Roshanak Azarafshar.

"The Imperial Roots of Global Trade", Journal of Economic Growth, 2020, Vol.:25(1), pp. 87-145, with Pierre-Louis Vézina & Gunes Gokmen.

"Natural Disasters and Trade: The mitigating impact of port substitution", Journal of Economic Geography, 2020, Vol.: 20(3), pp. 809–856, with Masashige Hamano.

"Scarcity drives economic development: The effect of energy subsidies on export diversification in the Middle East", in: Environmental Politics in the Middle East, Edited by Harry Verhoeven, Hurst publishers / Oxford University Press, September 2018.

"Emergence of Sovereign Wealth Funds", Journal of Commodity Markets, 2018, Vol.:11, pp. 1-21, with Jean-François Carpantier.

"Parliament in Gross Human Rights Violations: The Case of Darfur", Acta Politica, 2018, Vol.:53(3), pp 448–468, with Andreja Pegan

"Macroeconomic determinants of European stock and bond correlations: A tale of two regions", Journal of Empirical Finance, 2016, Vol.:37, pp.214-232, with Erica Perego.

"Dutch Disease and the Mitigation Effect of Migration: Evidence from Canadian Provinces", The Economic Journal, 2015, Vol.:125, Issue 589, pp.1574–1615, with Michel Beine & Serge Coulombe.

"The role of the Netherlands in the European Framework for an international response on Darfur during its Presidency in 2004–2005.", Genocide Studies International, 2014 Vol.:8(2) pp. 176–192, with Fred Grünfeld.

Failure to prevent Gross Human Rights Violations in Darfur 2003-2004. Warnings to and responses by international decisions makers. with Fred Grünfeld. Brill-Nijhoff, 2014.

"Failures to prevent genocide in Rwanda (1994), Srebrenica (1995), and Darfur (since 2003)." Genocide studies and prevention, 2009 Vol.:4(2) pp. 221–237, with Fred Grünfeld.

Co-authors' personal websites

Michel Beine, University of Luxembourg, Luxembourg.

Jean-François Carpantier, Aix-Marseille University, Aix-en-Provence.

Serge Coulombe, University of Ottawa, Ottawa.

Gunes Gokmen, Lund University, Sweden.

Masashige Hamano, Waseda University, Tokyo.

Andreja Pegan, Northumbria University, Newcastle.

Erica Perego, CEPII, Paris.

Pierre-Louis Vézina, King's College, London.


Google Scolar


Transatlantic Financial Contagion
Wessel N Vermeulen
Maastricht University, 31 July 2008.
My Master thesis for MSc Financial Economics, Maastricht University.
Close Thesis (pdf)
Failure to prevent Gross Human Rights Violations in Darfur 2003-2004. Warnings to and responses by international decisions makers.
Fred Grünfeld and Wessel N. Vermeulen
in cooperation with Jasper Krommendijk
Brill Martinus-Nijhoff publishers, May 2014.
The book looks at the role of states (US, UK, NL, FR) and international organisations (UN, EU) in their attempts to prevent the genocide in Darfur (2003-2005); from early warning to limited action in the field of humanitarian assistance, mediation, sanctions and peace-keeping.
The book uses several theories to explain how decision-making led to the (absence) of international responses.

ISBN: 978-90-04-26031-3.

an edited version of Chapter 3 is available at E-Internal Relations (05/2014)

Close AmazonBrillE-IR
Essays on Dutch Disease and International Finance
Wessel N. Vermeulen
PhD Dissertation in Economics, Awarded by University of Luxembourg, March 2013
Includes 4 self-contained chapters plus technical appendix using economic theory and econometric techniques.
  • External income, De-industrialisation and Labour mobility
  • Dutch Disease and the Mitigation Effect of Migration: Evidence from Canadian Provinces
  • Resource Income and the Effect on Domestic Neighbours: A Case study on Canadian Provinces
  • Macroeconomic Determinants of European Stock and Bond Correlations: A tale of Two regions
  • A specification Test for Pooled Estimators using GMM

  • ISBN: 978-99959-0-010-6

    You can order this book for only US$30 (or ~ €23).

    Close Amazoncontact me
Parliament in Gross Human Rights Violations: The Case of Darfur
Andreja Pegan and Wessel N. Vermeulen
Acta Politica, 2018, Vol.:53(3), pp 448–468.
Based on a study of three European parliaments, the article analyses parliamentary oversight on government policy towards gross human rights violations in third countries using the case of Darfur in Sudan (2003-2005). We find that parliaments with greater constitutional rights in foreign policy are more active in the scrutiny of executive action. Scrutiny is stronger in parliaments with developed and strong foreign affairs committees. Media and public awareness correlate with greater oversight activities in all the three chambers considered. In their oversight, MPs do not deter governments to consider the use of armed forces. Rather than revealing party differences, conflicts involving gross human rights violations such as Darfur are venues for the manifestation of division between the executive and legislature.

The Conversation, "Foreign parliaments are not powerless to help the Rohingya – their pressure on Myanmar is vital.", 27 November 2017.

Close Journal Online pdf The Conversation
Dutch Disease and the mitigation effect of Migration: Evidence from Canadian Provinces
Michel Beine, Serge Coulombe and Wessel N. Vermeulen
The Economic Journal, Vol. 125, Issue 589, pp. 1574–1615, Dec 2015.
OxCarre Research Paper 151, May 2014.
Ces-IFO Working Paper, No. 3813, May 2012.
CREA Discussion Discussion Paper Paper 2012-06, May 2012.
This paper looks at whether immigration can mitigate the Dutch disease effects associated with booms in natural resource sectors. We first derive predicted changes in the size of the non-tradable sector from a small general-equilibrium model à la Obstfeld-RogofFf, supplemented by a resource income and a varying labor supply. Using data for Canadian provinces, we test for the existence of a mitigating effect of immigration in terms of an increase in the size of the non-tradable sector triggered by the positive resource shock in booming regions. We find evidence of such an effect for the aggregate inflow of migrants. Disentangling those flows by type of migrants, we find that the mitigation effect is due mostly to interprovincial migration and temporary international migration. There is no evidence of such an effect for permanent international immigration. Nevertheless, interprovincial migration also results in a spreading effect of Dutch disease from booming to non-booming provinces.

DOI 10.1111/ecoj.12171

"Moving Parts: Immigration Policy, Internal Migration and Natural Resource Shocks", C.D. HOWE Institute, commentary, NO. 446, 10 March 2016, by Michel Beine, Robin W. Boadway and Serge Coulombe.
"Migration can boost the economy", Reach Magazine, Newcastle University, January 2018.


  • Workshop, ESOP – OXCARRE, Oxford, UK, 11/2013,
  • Invited Seminar, University of Utrecht, Utrecht, the Netherlands, 10/2012,
  • European Economic Association 2012 conference, Málaga, Spain, 08/2012,
  • PhD Workshop, University of Luxembourg, Luxembourg, 05/2012.
Close Journal full access Repec (WP) CD Howe NCL Reach
Failures to prevent genocide in Rwanda (1994), Srebrenica (1995), and Darfur (since 2003).
Fred Grünfeld and Wessel N. Vermeulen
Genocide Studies and Prevention, Vol. 4, Issue 2, pp. 221–237, Aug 2009.
This article presents the results of a comparative study of genocide prevention showing similarities that form a disappointing pattern of failure on the part of third parties to prevent genocide in three different situations: Rwanda, Srebrenica, and Darfur. Early, clear, and reliable warnings combined with a policy recommendation have not led to preventative action because they were not discussed by the responsible decision makers (Rwanda, Srebrenica) and/or because conflicting international concerns hindered firm action (Darfur). Instruments of prevention were available, in the form of UN peacekeeping troops who could have been empowered for successful prevention in combination with existing reinforcements (e.g., evacuation troops or NATO air support); however, this option was not on the decision makers’ agenda. The main explanation for the decisions made by these third parties is their inability to perceive a change from a peace-settlement situation to an emerging genocide and their consequent inability to react to such a change adequately. Rwanda and Srebrenica may be explained in this way, but not Darfur. Here the situation is different and more complicated, as this study shows by reference to the continuing international attention to the situation, on the one hand, and the continuing inability of third parties to change the situation on the ground, on the other. Sudan's political position in the world, as well as the negotiating power the Sudanese government draws from domestic circumstances, has deterred decision makers from initiating measures against Sudan's national sovereignty.

DOI 10.3138/gsp.4.2.221

Close Journal
Macroeconomic determinants of European stock and bond correlations: A tale of two regions.
Erica R. Perego and Wessel N. Vermeulen
Journal of Empirical Finance, 2016, Vol.:37, pp.214-232.
IRES Discussion Paper 2013-13, May 2013.
This paper presents an analysis of the Euro-zone financial markets based on a joint assessment of bonds, stocks and stock-bond correlations between groups of Euro-zone countries. The dynamic correlations visualise the divergence of integration in Europe and highlight the heterogeneity in these markets. Panel regressions using this setup on dynamic correlations offer new insights on the role of macro-economic determinants of financial markets between assets and regions. We find that when we allow for regional division, not only cross-asset correlations within regions behave differently from each other, but also cross-assets cross-regions dynamic correlations can be explained with macro-economic factors such as the relative market uncertainty between countries, balance of payments dynamics and other key macroeconomic indicators. The robust role of economic fundamentals in European financial market correlations points to the need for European economic integration based on sound macro-economic fundamentals for both current and future Euro-zone members.


  • INFINITI conference, Ljubljana, Slovenia, 06/2015,
  • DIW Macroeconometric Workshop (poster), Berlin, Germany, 12/2012
Close Journal pdf Repec (WP)
The role of the Netherlands in the European Framework for an international response on Darfur during its Presidency in 2004-2005.
Fred Grünfeld and Wessel N. Vermeulen
Genocide Studies International, Vol. 4, Issue 2, pp. 221-237, Fall, 2014.
Maastricht Faculty of Law Working Paper No. 2014-2, April 2014.
We discuss the role of the Netherlands with respect to the Darfur crisis during 2003-2005. From the moment the crisis broke out, the Netherlands was active as a major donor and tried to facilitate political solutions. During the period January 2004 - July 2005 it held the EU Presidency and was therefore involved in creating a common EU position. We discuss how policy was made while observing internal (domestic) and external (international) influences. We conclude that the Netherlands was partially successful in establishing a more active EU position regarding Darfur. However, we also find evidence that eventually the EU has lagged behind the response of the UN Security Council, despite being a major donor to emergency relief and the African Union mission in Sudan.

DOI 10.3138/gsi.8.2.04

Note: The published article is a quite different from the Working Paper, which has the title "The Role of the Netherlands in the international response to the crisis in Darfur."

Close Journal SSRN (WP)
Resource Income and the Effect on Domestic Neighbours: A case study on Canadian Provinces
Wessel N. Vermeulen
CREA Discussion Paper 2013-05, February 2013.
Resource income in a multi-regional setting allows for differentiated impacts of windfalls on the industrial development of each region. A resource exporting region suffers from Dutch disease through a spending effect and a real exchange rate ap- preciation. Whereas, a neighboring region will suffer from the real exchange rate appreciation but the increased demand from the region with the resource income of tradable goods will increase the traded good sector in the neighboring region. For a 2-region 2-sector model the equilibrium conditions on the labour allocation between the sectors are derived taking into account resource potential windfalls. The model is tested on and supported by a panel dataset of Canadian provinces.


  • Canadian Economic Association 2014 conference, Vancouver, Canada, 05/2014,
  • Internal seminar, OXCARRE, Oxford, UK, 01/2013
Close Repec (WP)
External income, De-industrialisation and Labour Mobility
Wessel N. Vermeulen
CREA Discussion Paper 2011-20, December 2011.
Relaxing the assumption of fixed labour in a general equilibrium model studying the impact of resource income on the allocation of labour across sectors offers insights on how labour mobility may mitigate adverse effects such as de-industrialisation caused by resource income. The theoretical model suggests clear signs of the impact of labour (downward) and the resource income (upward) on the relative size of the service sector. Indirect effects are visible through the interactions of both variables on each other. The model is estimated in a fixed effect panel model, which offers support to the model’s direct and indirect effects.

  • Australian Conference of Economists 2011, Canberra, Australia, 07/2011,
  • Invited seminar, University of Ottawa, Ottawa, Canada, 05/2011,
  • MIFN workshop, University of Shangdong, Jinan, China, 10/2010.
Close Repec (WP)
Emergence of Sovereign Wealth Funds
Jean-François Carpantier and Wessel N. Vermeulen
Journal of Commodity Markets, 2018, Vol.:11, pp. 1-21.
OxCARRE Research Paper 148, November 2014.
CREA Research Paper 2014-25, November 2014.
This paper tests the theoretically founded hypothesis that the surge of SWF establishments is determined by three main factors: 1) the existence of natural resources profits, 2) the government structure and 3) the ability to invest usefully in the domestic economy. We test this hypothesis on a sample of 20 countries that established an SWF in the period 1998-2008 by comparing them to the roughly 100 countries that did not set up a fund in the same period. We find evidence for all three factors. The results suggest that SWFs tend to be established in countries that run an autocratic regime and have difficulties finding suitable opportunities for domestic investments. We do not find the net foreign asset position of a country to be similarly related to the explanatory variables, indicating that the establishment of an SWF is distinct from a national accounting result. We argue that our results indicate that it is relevant to study how an SWF interacts with the domestic economy and government policy.


The impact of windfalls: Firm selection, trade and welfare
Gry Østenstad and Wessel N. Vermeulen
OxCARRE Research Paper 162, May 2016
We ask how a small open economy with heterogeneous firms responds to a resource windfall. A resource windfall boosts demand but also affects wages such that production costs increase. The result is a higher number of firms and renewed selection among firms: New firms at the lower end of the productivity continuum can produce for the domestic market, while only the most productive firms continue to export. While the share of firms that sell traded varieties decreases, the average productivity of exporting firms increases. The increase in the number of varieties caused by a larger number of firms and the inflow of additional imports implies that there is an increase in aggregate welfare over and above the direct windfall gain. We provide analysis in a model with two types of labor. The windfall causes a reallocation of labor types and a change in relative wages, thereby implying different welfare outcomes for each type of labor and the possibility of rising inequality.

This paper is merged into "Manufacturing in a Natural Resource Based Economy: Evidence from Canadian Plants".


  • Canadian Economic Association 2015 conference, Ottawa, Canada, 06/2016,
  • Royal Economic Society Annual Conference, Brighton, UK, 03/2016,
  • Invited seminar, NTNU, Trondheim, Norway, 10/2015,
  • Invited seminar, Sophia University, Tokyo, Japan, 07/2015,
  • Internal Seminar, OXCARRE, Oxford, UK, 05/2015.
Close OxCARRE (WP)
Scarcity drives economic development:
The effect of energy subsidies on export diversification in the Middle East
Wessel N. Vermeulen
in: Environmental Politics in the Middle East
Local Struggles, Global Connections,

Edited by Harry Verhoeven,
Hurst publishers / Oxford University Press, September 2018.

This study tests for the MENA region the effect of energy subsidies on export diversification in terms of exported varieties and number of destinations. Reform of fuel subsidies is a major issue for public finance and with regards to global climate change policy, while some MENA countries are among the highest subsidisers in the world. At the same time trade performance can be seen as a representation of general domestic economic development. Estimates suggest that subsidy reduction could be an effective tool to improve private sector performance through export diversification. Those MENA countries that have lower subsidies tend to export relatively more to advanced economies and more product varieties. These results are robust to controlling for unobserved country group characteristics, time trend, resource exports and income level.

Note: Prepared for the Workshop "The Geopolitics of Natural Resources in the Middle East" organised by the Center for International and Regional Studies, Georgetown University School of Foreign Service in Qatar.

For copyright reasons a working paper cannot be made available for this research. However, one page chapter summaries for all contributed chapters are available by clicking the button below.

Close Hurst OUP & online Amazon 1-page summary
The Imperial Roots of Global Trade
Gunes Gokmen, Wessel N. Vermeulen and Pierre-Louis Vézina
Journal of Economic Growth, 2020, Vol.:25(1), pp. 87-145 (open access).
FREIT Working paper 1229, October 2017
Throughout history empires facilitated trade within their territories by building and securing trade and migration routes, and by imposing common norms, languages, religions, and legal systems, all of which led to the accumulation of imperial capital. In this paper, we collect novel data on the rise and fall of empires over the last 5,000 years, construct a measure of accumulated imperial capital between countries, and estimate its relationship with trade patterns today. Our measure of imperial capital has a positive and significant effect on trade beyond potential historical legacies such as sharing a language, a religion, a legal system, or links via natural trade and invasion routes. This suggests a persistent and previously unexplored influence of long-gone empires on current trade.

Royal Economic Society (RES) 2018 Annual Conference, media briefing., "Imperial Roots of Global Trade", 1 February 2020.


  • Invited seminar, University of Victoria, Victoria, Canada, 07/2018,
  • Royal Economics Society Annual Conference, Sussex, UK, 03/2018.
All source files and code will be provided at the journal website. Additionally, the empires dataset is provided in an explorable website, with additional source information. The data can also be downloaded in a convenient csv format.
The paper also uses global distance measures that aims to go beyond geodesic (straight line) distances. The idea behind this is that distances in ancient times are better approximated by the time it took to walk or sail between two locations, taking into account geographical barriers to such modes of transport. An explanation on how to build a GIS based network to estimate such distances is provided.

Empires database Global Routing

CloseJournal (open access)FREIT (WP)VoxEU

Natural Disasters and Trade: The mitigating impact of port substitution
Masashige Hamano and Wessel N. Vermeulen
Journal of Economic Geography, 2020, Vol.: 20(3), pp. 809–856 (open access).
WINPEC Working Paper Series No.E1706, July 2017.
OxCARRE Research paper 198, September 2017.
We study the effect of natural disasters on port level exports. We model the interaction between firms and ports to study how strongly exports from one port are affected by changes in the cost of exporting at neighboring ports. We extend the standard trade model with heterogeneous firms to a multiple port structure where exporting is subject to port specific local transportation costs, port specific fixed export costs and international bilateral trade costs. We show that gravity distortion due to firm heterogeneity is conditional on the comparative advantage at the port level and resulting substitution of exports across ports. We present evidence of the substitution effect using the 2011 Great East Japan Earthquake, indicating that at least 40% of exports was substituted to other ports following the disaster. The substitution effects is strongest in technology intensive product categories, which suggests an interaction between supply chains and domestic trade costs.

Earlier version distributed under the title: "Adapting to within-country export barriers: Evidence from the Japan 2011 Tsunami"


  • Invited seminar, McMaster University, Hamilton, Canada, 09/2017,
  • AFSE, French Economics Association Annual meeting, Nice, France, 06/2017,
  • Irish Economics Association Annual Conference, Dublin, Ireland, 05/2017,
  • Invited seminar, University of Sydney, Sydney, Australia, 04/2017
  • Invited seminar, CEPII, Paris, France, 02/2017,
  • Internal seminar, Newcastle University, Newcastle, UK, 11/2016.
Data: (163.4MB) (26.8KB)

Close Journal (open access) Working paper (Jan 2019)Waseda (WP, Jul 2017)OxCARRE (WP, Sep. 2017)
Manufacturing in a Natural Resource Based Economy: Evidence from Canadian Plants
Saeed Moshiri, Gry Østenstad and Wessel N. Vermeulen
OxCARRE Research paper 216, February 2019.
This study investigates the effects of an oil boom on firms' performance using data from the Canadian Annual Survey of Manufactures. We exploit the time variation of the booming natural resource sector activity in an oil-producing area with the location of manufacturing plants. We hypothesize that the effect of the booming sector on plants depends on their spatial proximity, which allows us to create an exogenous treatment variable. The outcome variables include plant-level wages, employment, sales, and exports. We find that the effect of the booming sector on the incidence of exporting varies greatly by plant-level productivity. More productive plants become more likely to export relative to less productive plants. They can do so by paying a higher wage, while employment grows less than plants that serve only the domestic market. We find that initial productivity and plants' ability to export provides an important differentiation in average plants effects. In particular, while there is a great variety in the effect by sector, a clear linkage with the resource industry is not observed. abstract from reviewed CEA abstract submission

Keywords: natural resources, heterogeneous firms, regional economics

JEL: L6, O4, R11, R15.

This project was funded by the Productivity Partnership which is supported by the Social Sciences and Humanities Research Council of Canada.


  • EAERE 2019 conference, Manchester, United Kingdom, 26-29 June 2019.
  • Canadian Economic Association 2019 conference, Montreal, Canada, 31 May 2019.
  • Invited Seminar: University of Saskatchewan, Saskatoon, Canada, 27 May 2019.
  • Canadian Economic Association 2018 conference, Montreal, Canada, 06/2018 (Preliminary Results).
CloseOxCARRE (Feb 2019) SSRN
The cost of being stuck outside the Single Market
Evidence from firms in central and eastern Europe.
Wessel N. Vermeulen
This paper studies the performance of firms in the border regions of central and eastern Europe countries following the 2004 and 2007 EU enlargement. The enlargement transformed the character of some borders, where many became internal or external EU borders. The study combines three flows of EBRD-World Bank survey data to obtain a sample of over 4,000 firm-observations, for 44 border regions in 15 countries. Taking border transformations as exogenous changes to firms' environments, and focusing on small and medium size enterprises near borders, results indicate that firms in non-EU countries near a new external EU border experienced a substantial fall in sales and exports five years after enlargement relative to firms near borders that did not change, of about 50% of exports sales. Firms on the EU side of the same border experienced no such effect, but firms near new internal EU borders perform relatively better. The effects diminish at the longer term.

Keywords: Borders regions; firms; exports; EU enlargement; Schengen; central and eastern Europe


  • RSAI-BIS 2019 Conference, Cambridge, 16-19 July 2019
CloseWP (Dec 2019)
Economic consequences of follow-up disasters: lessons from the 2011 Great East Japan Earthquake
Anastasios Evgenidis, Masashige Hamano and Wessel N. Vermeulen
TCER working paper E-152
We apply a Bayesian Panel VAR (BPVAR) and DSGE approach to study the regional effects of the 2011 Great East Japan Earthquake. We disentangle the persistent fall in electricity supply following the Fukushima accident, from the immediate but more temporary production shock attributable to the natural disaster. Specifically, we estimate the contribution of the electricity fall on the regions economic recovery. First, we estimate a BPVAR with regional-level data on industrial production, prices, and trade, to obtain impulse responses of the natural disaster shock. We find that all regions experienced a strong and persistent decline in trade, and long-lasting disruptions on production. Inflationary pressures were strong but short-lived. Second, we present a DSGE model that can capture key observations from this empirical model, and provide theoretical impulse response functions that distinguish the immediate earthquake shock from the persistent electricity supply shock. Thirdly, in line with the predictions from the theoretical model, counterfactual analysis via conditional forecasts based on our BPVAR reveals that the Japanese regional economies, particularly the hit regions, did experience a loss in production and trade due to the persistent fall in electricity supply.

Keywords: natural disasters; Bayesian Panel VAR; DSGE; regional spill-overs; counterfactual analysis

Close TCER (WP)
Electric Vehicle Incentive Policies in Canadian Provinces
Roshanak Azarafshar and Wessel N. Vermeulen
Energy Economics, 2020, Volume 91
This study aims to find the effects of financial point of sales incentives on the sales of electric vehicles across the Canadian provinces from September 2012 to December 2016. Our findings indicate that purchase incentives cause the sales of new electric vehicles to increase by 8.5% on average due to a C$1000 increase in incentives. We find that 47% of electric vehicle sales across the rebating provinces (Ontario, Quebec, and British Columbia) are attributed to the purchase incentives. Results of the counter-factual simulations imply that the cost of eliminating one tonne of carbon emissions across the provinces that offer incentives over the years of our study is, on average, C$480/tonne CO2.

Keywords: Electric vehicles; Green subsidies; Carbon policy

Close Journal Open access until 17 Oct
Economic Spillovers from resource extraction: subnational government revenues and spending patterns in Indonesia
Ridwan D. Rusli and Wessel N. Vermeulen
OxCARRE Research paper 222, November 2019.
We examine the economic consequences of resource extraction and the associated revenue windfalls on subnational government revenues and spending patterns. Making use of Indonesia’s fiscal sharing rules and an offshore oil and gas production instrument, we find a positive impact of resource revenues on the center-local balancing funds including the general allocation fund, despite the latters’ fiscal rebalancing purposes. Fiscal windfalls from resource extraction increase public sector spending on capital and infrastructure projects as well as public goods and services, with positive spillover benefits on local tax revenues. At the same time spending on personnel and administration increases less and decrease as percentage of total expenditures. Interaction with district economic governance index data indicates enhanced infrastructure spending but also increases in the balancing funds.

Keywords: Resource extraction; fiscal- and direct economic spillovers; decentralization; subnational government budgets; South-East Asia; Indonesia

CloseOxCARRE (Nov 2019)