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

Labor Informality Figures 1. Events and Oil Drilling 1940–2011 2. GDP Per Capita in Oil and Non-Oil Municipalities 3. Oil Wells in Brazil 1940–2000 4. Treatment and Control Groups A.1. Distribution of Royalties: 1994–2000 Appendices 1. Summary Statistics 2. Using Microdata from RAIS and the Population Census

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

population density. Using historical data on sectoral employment, we calculate a measure of sectoral output per worker and show that oil discoveries increase GDP mainly by increasing output per worker. We also show that while both onshore and offshore discoveries increase manufacturing GDP (potentially in a mechanical way, since manufacturing includes oil production), only onshore discoveries increase services GDP and urbanization. We hypothesize that demand from well-paid oil workers is responsible for the observed increase in services and urbanization. Oil municipalities

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.

-paid oil workers is responsible for the observed increase in services and urbanization. Oil municipalities become local service and commerce hubs which benefit from improved output per worker. In order to shed light on whether our results are mainly driven by local price effects or real changes in the economy, we look at recent microdata from the Brazilian employment and population censuses. We find that municipalities in which oil was discovered have larger services firms, a higher density of formal services workers, and a lower fraction of workers employed in the

Mr. Ravi Balakrishnan, Sandra Lizarazo, Marika Santoro, Frederik G. Toscani, and Mr. Mauricio Vargas

coefficients are set to zero when they are not significant at least at the 10 percent level. When they are significantly different from zero, the graph shows the impact of a one standard deviation increase in the value of natural resource production per capita between 2000 and 2010. The impact of the offshore oil boom on poverty and labor allocation was much smaller. In contrast to mineral municipalities but in line with the results for Bolivia , public sector employment rose in offshore oil municipalities. Labor also shifts toward services and construction—since there

The December issue of the Research Bulletin looks at “Seven Questions about Climate Change” (Rabah Arezki and Akito Matsumoto). The Research Summaries review “Winning the Oil Lottery: The Impact of Natural Resource Extraction on Growth” (Tiago Cavalcanti, Daniel Da Mata, and Frederik Toscani) and “Malaysia: Achieving High-Income Status through Resilience and Inclusive Growth” (Alex Mourmouras and Naimh Sheridan). The issue also includes regular updates on new IMF Working Papers, Staff Discussion Notes, IMF books, and the IMF Economic Review.
Mr. Ravi Balakrishnan, Sandra Lizarazo, Marika Santoro, Mr. Frederik G Toscani, and Mr. Mauricio Vargas
Over the past decades, inequality has risen not just in advanced economies but also in many emerging market and developing economies, becoming one of the key global policy challenges. And throughout the 20th century, Latin America was associated with some of the world’s highest levels of inequality. Yet something interesting happened in the first decade and a half of the 21st century. Latin America was the only region in the World to have experienced significant declines in inequality in that period. Poverty also fell in Latin America, although this was replicated in other regions, and Latin America started from a relatively low base. Starting around 2014, however, and even before the COVID-19 pandemic hit, poverty and inequality gains had already slowed in Latin America and, in some cases, gone into reverse. And the COVID-19 shock, which is still playing out, is likely to dramatically worsen short-term poverty and inequality dynamics. Against this background, this departmental paper investigates the link between commodity prices, and poverty and inequality developments in Latin America.