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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThis paper studies the effect of oil discoveries on economic growth in Brazilian municipalities for the period from 1940 to 2000. It uses a unique identification strategy which exploits data on the drilling of approximately 20,000 oil wells in Brazil since oil explorations began in the country. We argue that oil discoveries are randomly assigned conditional on geological characteristics. The quasi-experimental outcome from drilling generates the treatment assignment: municipalities where oil was discovered during drilling constitute the treatment group while municipalities with drilling but no discovery are the control group. In our preferred specifications we find that oil discoveries increase per capita GDP by 25% over the 60-years period compared to the control group. Importantly, oil extraction has positive spillovers to other sectors of the economy. Services GDP per capita is estimated to increase by roughly 20% and urbanization by over 4% points. We show that the increase in services GDP per capita is mainly due to an increase in labor productivity. In line with intuition, these spillovers are present for onshore but not for offshore discoveries.Among other potential channels, the results are consistent with an increase in local demand for non-tradable services driven by the oil producing firm and highly paid oil workers.

IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

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This paper provides evidence of the causal impact of oil discoveries on local development. Novel data covering the universe of oil wells drilled in Brazil allow us to exploit a quasiexperiment: Municipalities where oil was discovered constitute the treatment group, while municipalities with drilling but no discovery are the control group. The results show that oil discoveries significantly increase local production and have positive spillovers. Workers relocate from informal, low productivity agriculture to higher value-added activities in formal services, increasing urbanization. The results are consistent with greater local demand for non-tradable services driven by highly paid oil workers.

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