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The Long Term Consequences of Resource-Based Specialisation†
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Corresponding author: Guy Michaels, Department of Economics and Centre for Economic Performance, London School of Economics, Houghton Street, London WC2A 2AE. E-mail: g.michaels@lse.ac.uk.
I thank Daron Acemoglu, Joshua Angrist, Oriana Bandiera, Abhijit Banerjee, Emek Basker, Tim Besley, Robin Burgess, Esther Duflo, Todd Gormley, Juan Carlos Hallak, Alan Manning, Imran Rasul, Steve Redding, Ariell Reshef, Carmit Segal and John Van Reenen for helpful suggestions and discussions. I also thank seminar participants at Bocconi, Bristol, LSE, Northwestern, Pompeu Fabra, QMUL, Stanford, Surrey and UCLA, and conference participants at CEPR-EUDN (Paris), CEPR Conference on Education (Bergen) and the NBER Summer Institute Trade and Investment Workshop. I acknowledge generous support from the George and Obie Shultz Research Fund.
Abstract
Using geological variation in oil abundance in the Southern US, I examine the long term effects of resource-based specialisation through economic channels. In 1890 oil abundant counties were similar to other nearby counties but after oil was discovered they began to specialise in its production. From 1940–90 oil abundance increased local employment per square kilometre especially in mining but also in manufacturing. Oil abundant counties had higher population growth, higher per capita income and better infrastructure.