Hydropower Resource Curse?

Abstract

The thesis empirically investigates how revenues from hydropower resources affect local governments in Norway, using methods and approaches from recent innovation in applied econometrics. It emphasizes the importance of using exogenous measures of resource abundance, and investigates how revenues from natural resources affect the efficiency of public good production, the wages of public sector leaders and public sector energy efficiency.

The first article, entitled “Local Natural Resource Curse?” utilizes exogenous variation in natural resource abundance by instrumenting the variation in hydropower revenue by topology, average precipitation and meters of river in steep terrain. This is used to test two hypotheses: The Paradox of Plenty hypothesis and the Rentier State hypothesis. The results support the Paradox of Plenty hypothesis - that higher local government revenue reduces the efficiency in production of public goods. The results does not find support for the Rentier State hypothesis - that revenue derived from natural resources should harm efficiency more than revenue derived from other sources such as taxation.

The second article, “Natural Resources and Public Sector Wages”, is an empirical analysis of the effect of natural resource abundance on local public sector leader wages in Norway. The main hypotheses are that a public sector revenue shock from the resource sector: (i) positively affects leader wages; (ii) affects leader wages more than other public sector wages. The results imply that resource abundance does not affect leader wages more positively than for other public sector wages.

The third article, “Hydropower Policy and Energy Saving Incentives” examines the implications for energy efficiency of legislation granting local governments that are affected by hydropower production to buy up to 10 percent of the power basis. The actual transferred concession power is restricted to general electricity consumption in the community, resulting in reduced incentives to save electricity for some local governments. The findings in the paper indicates that local governments with a positive gap between the level of concession power and the level of general electricity consumption use significantly more energy in their public buildings than other local governments