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Mr. Tiago Cavalcanti, Daniel Da Mata, and Mr. Frederik G Toscani

producing municipalities. The remainder of this paper proceeds as follows. Section II provides background on oil drilling and on the key institutional aspects of oil exploration in Brazil. Section III details the research design used to identify the impact of oil on growth. We combine several datasets which are detailed in a subsection of Section III . Section IV discusses the estimation strategy. Section V shows the results and robustness checks. Section VI concludes. II. Background A. Oil Drilling Oil and gas exploration is a risky business. Oil

Mr. Tiago Cavalcanti, Daniel Da Mata, and Mr. Frederik G Toscani

Front Matter Page Fiscal Affairs Department Contents I. Introduction II. Background A. Oil Drilling B. A First Look at Oil in Brazil III. Research Design A. Data B. Treatment Assignment C. Assessing the Design IV. Estimation V. Results A. Baseline Results B. Further Results C. Explaining the Mechanism VI. Conclusion References Tables 1. Number of Discoveries by Decade 2. Number of Wells by Category 3. Discoveries, Conditional on Drilling 4. Overlap of Treatment and Control Group 5. Intention

Mr. Tiago Cavalcanti, Daniel Da Mata, and Mr. Frederik G Toscani
This paper provides evidence of the causal impact of oil discoveries on development. Novel data on the drilling of 20,000 oil wells in Brazil allows us to exploit a quasi-experiment: Municipalities where oil was discovered constitute the treatment group, while municipalities with drilling but no discovery are the control group. The results show that oil discoveries significantly increase per capita GDP and urbanization. We find positive spillovers to non-oil sectors, specifically, an increase in services GDP which stems from higher output per worker. The results are consistent with greater local demand for non-tradable services driven by highly paid oil workers.