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  • Editors’ Summary
  • Eduardo Engel, Francisco H. G. Ferreira, and Roberto Rigobon

This volume of Economía consists of five papers. The first two papers tackle natural resource management. The first of these, by Daniel Lederman and William F. Maloney, explores whether the resource curse exists. The second paper, by Osmel Manzano and Francisco Monaldi, studies the economic and political economy circumstances that have driven countries to expropriate oil contracts. The next two papers are related to trade openness: Eduardo A. Cavallo analyzes the relationship between trade openness and output volatility, while Erik Thorbecke and Machiko Nissanke assess the impact of trade openness on poverty and income distribution. Finally, the volume fin-ishes with Francisco A. Gallego and Andrés E. Hernando’s very important paper on school choice under the Chilean voucher system.

In “In Search of the Missing Resource Curse,” Lederman and Maloney critically tackle the problem of whether the natural resource curse exists. The idea that countries rich in natural resources are “doomed” by the existence of their lucky endowment has been in the minds of economists for more than 200 years. Perhaps the most important empirical findings supporting the natural resource curse are the seminal contributions by Jeffrey Sachs and Andrew Warner, who consistently find that countries rich in natural resources tend to grow more slowly than their unendowed counterparts.1 Many have questioned this view, although the two most prominent critics have been Lederman and Maloney.2 In this paper, they argue that the channels through which the natural resource curse is most commonly thought to operate are not empirically relevant and most of them are theoretically questionable. The paper builds on earlier work to illustrate that the existing stylized fact of a curse is inconclusive at best. The authors use a better measure for resource intensity than what previous researchers have used and find no evidence of a curse. This [End Page ix] is a thought-provoking and carefully crafted paper that convincingly argues against one of the strongest views supported by the conventional wisdom.

The second paper devoted to natural resources is “The Political Economy of Oil Production in Latin America,” by Manzano and Monaldi. The 1990s started with a massive expansion of private sector investment in the oil industry. The private sector was thus responsible for the sizable development of reserves and production in several emerging markets. Together with this effort, an unprecedented increase in prices began in 1998 and only just ended in July 2008. During this time, the oil industry witnessed several expropriations and contract renegotiations. The most dramatic events occurred in Bolivia and Venezuela, but even the United Kingdom renegotiated contracts by changing their tax rates. Manzano and Monaldi argue that the recent trend in expropriations and renegotiation in Latin America is the consequence of the rise in the international price of oil. Of course, countries reacted very differently to the oil price increases. In Brazil, Colombia, and Peru, the institutional framework and property rights were strengthened, whereas that was not the case in Bolivia, Ecuador, and Venezuela. The authors study the relationship between the local institutional framework and how large movements in prices drive expropriation incentives. Their story is not just about the last seven years but rather rationalizes the experience of the oil industry over the last century. If Manzano and Monaldi are right, the recent drop in oil prices will generate a push toward privatization, which will be reversed when oil prices increase. This paper presents a fascinating and intriguing challenge for policy. Can contracts be improved to minimize the cycles? If the contracts are going to be renegotiated when extraordinary circumstances appear, should the contracts include clauses intended to deal with such situations?

The next two papers study the impact of trade openness on output volatility and on poverty. Cavallo’s paper, “Output Volatility and Openness to Trade: A Reassessment,” studies the relationship between trade openness and output volatility. It is commonly held that openness to trade increases the average growth rate of GDP but also increases its variance. Cavallo argues that this finding does not take into account the fact that trade openness has a stabilizing effect through the financial channel. Cavallo finds that, as...


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pp. ix-xii
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