Good mine, bad mine: Natural resource heterogeneity and Dutch disease in Indonesia

(Journal of International Economics, Volume 131, 2021. Joint with Steven Poelhekke) CEPR DP15271 TI DP 18073 OxCarre RP 214 CESifo WP 7284

Abstract: We analyse the local effect of exogenous shocks to the value of mineral deposits at the district level in Indonesia using a panel of manufacturing plants. We introduce heterogeneity in natural resource extraction methods, which helps to explain the mixed evidence found in the `Dutch disease’ literature. In areas where mineral extraction is relatively capital-intensive, mining booms cause virtually no upward pressure on manufacturing wages, and both producers of traded and local goods benefit from mining booms in terms of employment. In contrast, labor-intensive mining booms drive up local manufacturing wages such that traded-goods producers reduce employment.


Capital Regulations and the Management of Credit Commitments during Crisis Times

(joint with María Teresa Valderrama; conditionally accepted at Review of Finance) NHH DP FOR12/2020)

Abstract: Borrower drawdowns on credit commitments reduce a bank’s capital buffer. Exploiting Austrian credit register data, and the 2008-09 financial crisis as an exogenous shock to bank health, we provide novel evidence that capital-constrained banks manage this concern by cutting credit commitments that are not fully used. Controlling for banks’ capital position, we find that also liquidity problems induce banks to cut such commitments during the crisis. However, banks manage the capital and liquidity risk that is posed by undrawn credit in a way that limits negative macroeconomic implications: credit cuts are targeted towards financially less constrained firms, and we show that borrowers of more-affected banks can substitute lost credit via other banks and do not suffer real effects. Additional findings suggest that voluntary agreements between constrained banks and strong firms to reduce spare borrowing capacity can explain why strong firms experience larger credit cuts.

Electing Educated Leaders during Democratization: Evidence from Indonesia

(joint with Steven Poelhekke; accepted at Journal of Economic Growth) CEPR DP16486; VoxDev

Abstract: Does the economic success of democratization depend on newly elected leaders’ characteristics? We exploit the unique Indonesian democratization process, where districts exogenously democratized in different years. In a census of manufacturing plants, employment drops by 5\% in districts that elect a non-college educated mayor, while employment stays constant under college graduates. Non-college educated mayors substantially raise taxation but provide less infrastructure, do not spend more on social programs, and are more often involved in corruption cases. Other leader attributes and district characteristics, as well as tests for pre-treatment trends, selection on unobservables and different effects for close elections do not explain away the important role of leaders’ education in shaping local policies and growth.


Politics and Financial Intermediation: Evidence from Brazil (joint with Matias Ossandon Busch)

Natural resources and non-resource innovation (joint with Federica Coelli: first draft coming soon!)

Restricting raw material exports: good at home, bad for the world? (joint with Maarten Bosker and Steven Poelhekke)