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; Resubmitted to 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 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 further find that also larger liquidity problems induce banks to cut such commitments. These results show that banks manage both capital and liquidity risk posed by undrawn credit in periods of financial distress. However, we find that banks do so in a way that limits negative macroeconomic implications: credit cuts are targeted towards less financially constrained firms, and we show that borrowers of more affected lenders can substitute lost credit and do not suffer real effects. Additional findings suggest that voluntary agreements between constrained banks and strong firms to reduce spare borrowing capacity may help explain our results.

Electing Educated Leaders during Democratization: Evidence from Indonesia

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

Abstract: Using manufacturing plant-level census data from Indonesia, we show that the effect of democratization on manufacturing performance crucially depends on the education level of the newly elected local leaders. In districts that elect a mayor without college education, employment drops by five percent in the first few years after democratization, while employment stays constant under college-educated mayors. We also identify mechanisms: manufacturing plants in districts with non-college educated mayors face a much larger increase in local taxes, but also worse provision of local infrastructure and no extra spending on other public goods. A novel hand-collected dataset on corruption cases further suggests that democratic mayors without a college degree are more corrupt. Our estimates are plausibly causal since the year of local democratization varies exogenously across districts, and districts with different mayor education levels exhibit parallel trends in manufacturing prior to democratization.


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