Working Papers

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

Natural resource news shocks and revenue windfalls each generate distinct governance dynamics underlying the Resource Curse. Leveraging quasi-experimental subnational variation in offshore oil discoveries and subsequent revenue realizations in Brazil, I find that (i) municipalities where discoveries are realized enjoy significant growth in revenues and spending, but fail to improve public goods provision or stimulate local economic activity; (ii) municipalities that experience discovery announcements but never receive anticipated windfalls suffer long-term declines in revenues, investment, and public goods provision. Electoral responses underlie these dynamics. Discovery announcements draw less-educated candidates into local politics–potentially worsening rent-seeking and state capacity–and shortfalls between anticipated and realized oil revenues reduce reelection rates for incumbents–increasing turnover and disrupting public service delivery. Results highlight the importance of accounting for heterogeneity in discovery realizations, and reveal mismanagement of windfalls and adjustment costs after disappointment as two faces of the Resource Curse.

Timing is Everything: Labor Market Winners and Losers from Energy Booms and Busts
(with Dominic Parker and Steven Poehlekke)   Working Paper   Slides (60 Minutes)

We use linked employer-employee panel data from Brazil to estimate dynamic effects of being hired into the volatile oil and gas sector on workers’ labor market outcomes. Oil generates inequality both between and within worker cohorts. Highly educated workers hired at the beginning of an oil boom capture nearly all earnings and employment benefits of the boom and are insulated from downturns by job stability in knowledge-intensive roles. Later high-education entrants compete with a glut of oil-specific graduates and suffer from “stranded careers” after oil busts. Low-education workers never enjoy earnings premiums during booms, and lose their jobs during busts.

Landholding Elites and the Local Politics of Deforestation: Property-Level Evidence from the Amazon
(with Fanny Moffette)   Working Paper Coming Soon!

We combine individually identified land cadasters, registries of political candidates and campaign donors, and remote sensing data to construct a novel twenty-year panel of land use change on properties belonging to municipal politicians and donors in the Brazilian Amazon. We find that 25% of mayors elected between 2000-2016 are landholders, with the average landholding mayor owning 2.9 properties totalling 2,898 hectares. 20% of landholding mayors receive at least one environmental violation, and their properties lose on average 41% of forest cover between 2000-2019. Estimating event studies around close mayoral elections, we find entry into office has no measurable effect on candidates’ personal land use, but significantly increases soy cultivation on their donors’ properties. At the municipality level, close election of a mayor who received donations from landholders leads to increased land conversion to soy, deforestation, and environmental violations. Landholder-financed mayors govern differently: they increase spending to promote agriculture and oversee expansion of rural credit.

Work in Progress

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).