Work In Progress

Winning and Losing the Resource Lottery: Governance after Uncertain Oil Discoveries
Job Market Paper   Slides   World Bank Development Impact Blog

Resource discoveries are often followed by long delays and heterogeneous production outcomes. Post-discovery uncertainty creates challenges for governance: policymakers may alter present behavior in anticipation of future revenues or struggle to adapt to disappointed expectations. I exploit quasi-experimental subnational variation in oil discoveries and subsequent production realizations in Brazil to identify dynamic effects of news and revenue shocks on municipal public finances, public goods provision, and political competition, selection, and patronage. Relative to never-treated controls, places that experience discovery announcements but never receive anticipated windfalls suffer significant declines in per capita investment and public goods spending after ten years. Places where discoveries are realized enjoy significant growth in per capita revenues and spending, but do not invest in economic diversification and fail to improve public goods provision. Findings reveal inefficient windfall spending and adjustment costs after disappointment as two faces of the resource curse, and highlight the importance of accounting for heterogeneity in production outcomes after discovery announcements.

Labor Reallocation, Human Capital Investment, and “Stranded Careers”: Evidence from an Oil Boom and Bust
(with Dominic Parker and Steven Poehlekke)   Working Paper   Slides (60 Minutes)

Sectoral expansions and contractions have significant worker-level and distributional consequences. Using linked employer-employee panel data from Brazil–a country that experienced oil booms and busts during the 2000s and 2010s–we estimate dynamic effects of being hired into the volatile oil and gas sector on workers’ subsequent wages, employment, and earnings. We find that oil generates inequality both between and within worker cohorts. Highly-educated early entrants capture nearly all the earnings benefits of the oil boom and are insulated from downturns by seniority and a higher likelihood of holding professional roles within firms. Later high-education entrants must compete with a glut of new graduates from oil-specific degree programs, and suffer from “stranded careers” after oil busts. Low-education workers never enjoy earnings premiums during booms and lose their jobs during busts. Our findings contribute evidence on the job-creation potential of energy sectors and the distributional consequences of energy transitions.

Agricultural Elites, Special Interest Politics, and Deforestation: Property-Level Evidence from the Amazon
(with Fanny Moffette)   Working Paper Coming Soon!   Slides (60 Minutes)

How do local leaders’ personal and political incentives shape tropical deforestation and land use? We combine individually identified land cadasters for the Brazilian Amazon, registries of political candidates and campaign donors, and remote sensing data to construct a novel panel of land use change on properties belonging to municipal politicians and donors between 2000-2019. We estimate event studies around close mayoral elections and find that deforestation weakly increases on successful candidates’ properties while they are in office, as well as on the properties of their campaign donors. Landholding mayors extensify production by expanding pasture (perhaps due to low supervisory costs); donors intensify production by expanding agriculture. At the municipality-level, close election of a mayor who received landholder donations increases deforestation, landconversion to agriculture, and registry of environmental violations. Landholder-financed mayors increase municipal spending on agricultural promotion and are more likely to receive matching grants for agriculture.

Can Natural Resources Promote Industrialization? Firms, Competition, and Spillovers from an Industrial Policy

Industrial policies are hotly debated, but empirical evidence of their efficacy and underlying mechanisms is thin. I evaluate a common industrial policy–a local content requirement (LCR)–which requires multinational firms to source a percentage of their inputs from local suppliers. Using firm-level panel data from Brazil, I measure whether an LCR for the oil sector increased manufacturing firm growth, innovation, and productivity among upstream input-suppliers, or instead led to rent-seeking and inefficiencies. Competition is a primary mechanism underlying successful industrial policies. I measure whether targeted firms in more competitive subsectors exhibit higher productivity growth relative to firms in less competitive subsectors after introduction of the policy. Another justification of industrial policies is their potential to create positive spillovers. By measuring supply-chain linkages and distance between targeted and non-targeted firms, I estimate spillover effects of the LCR on the broader manufacturing sector. Finally, I leverage data on campaign donations made by LCR beneficiary firms and firm owners to explore the role of special interest politics in sustaining the LCR.

Peer-Reviewed Publications

The Relation Between Labor Productivity and Wages in Brazil: A Sectoral Analysis
Erik S. Katovich and Alexandre Gori Maia
Nova Economia, Vol. 28, No. 1, pp. 7-38 (2018)
PDF   Published Version

Click for Abstract Labor productivity is a crucial long-run determinant of real wages. Nonetheless, wage and productivity dynamics often diverge in practice due to a range of economic and institutional factors. This study analyzes the relation between the dynamics of labor productivity and wages in Brazil from 1996 to 2014, and adopts a sectoral perspective to account for divergent trends among economic sectors. Analyses are based on pooled data drawn from the National Accounts and the Pesquisa Nacional por Amostra de Domicílios, and hierarchical data models are estimated to assess the impacts of state- and sector-level factors on individuals’ wages. Results indicate that productivity is significantly positively associated with wage levels for all economic sectors, but that institutional factors such as labor formalization and minimum wage exert equally significant impacts, suggesting that wage growth over the 1996-2014 period was as much the result of institutional changes as of transformation of Brazil’s productive structure.

Are GMO Policies “Trade Related”? Empirical Analysis of Latin America
Pamela J. Smith and Erik S. Katovich
Applied Economic Perspectives and Policy, Vol. 39, No. 2, pp. 286-312 (2017)
Published Version

Click for Abstract This paper empirically examines whether GMO policies are “trade related” for countries in Latin America (LA). First, we use the Balassa index to assess the “revealed comparative advantage” of LA countries. We find that LA countries have a revealed comparative advantage in GMO industries relative to the world, and that intra-regional trade in these industries is modest relative to external trade. Second, we estimate the Gravity model to examine the effects of importers’ GMO policies on Argentina and Brazil’s bilateral exports of soybeans and maize. We find that strong GMO policies in importers have a negative effect on Argentina’s bilateral exports of soybeans (an industry and country with historically high GMO content). Further, we find that past GMO policies are a strong determinant of Argentina’s future bilateral exports, and that the negative trade effects of strong GMO policies are increasing over time. In contrast, we find a weaker relationship between the GMO policies of importers and Brazil’s bilateral exports (consistent with Brazil’s more recent increases in GMO content). These findings for Argentina and Brazil provide a benchmark for other developing countries that are looking for guidance on servicing trading partners with diverse GMO policies.

Other Publications

What do we really know about the impacts of improved grain legumes and dryland cereals: A critical review of impact studies
Erik S. Katovich, Andrew W. Feist, Karl Hughes, Kai Mausch, and Michael Hauser
ICRAF Working Paper Series, No. 295, World Agroforestry-Nairobi (2019).