Fueling development? Assessing the impact of oil and soybean wealth on municipalities in Brazil

The commodity boom of the 2000s, which now came to an end, represented a windfall to resource-rich countries. However, the benefits − or potential curse − likely had heterogeneous effects at the local level, with the potential to increase regional or income inequalities within countries. This paper examines the impact of the international commodity boom during the first decade of the 2000 s on different parts of Brazil. Using a range of quantitative techniques, it estimates the changes in development and inequality indicators between 2000 and 2010 among oil rich, soybean rich, and resource poor control municipalities. Our results indicate both that there is a “catch-up” effect benefitting less developed, resource poor municipalities, and that oil rich municipalities may be experiencing some of the dynamics associated with a resource curse. These findings are broadly in line with existing empirical research on the effect of oil wealth on local development in Brazil. We argue that national-level institutions and social programs that redistribute the windfall and constrain how local governments spend their resources likely constitute part of the reason for why regional inequalities have not been exacerbated as a result of the boom and local resources curses are at most incipient.