Abstract
Basilicata is a region of Southern Italy where the expansion of oil operations in the 1990s was promoted as an opportunity to foster economic development. Flash-forward to 2020, Basilicata is one of the poorest regions in Italy despite the exploitation of some of the largest onshore hydrocarbon reserves within the European Union. The coincidence of high poverty rates with abundant natural resources suggests that the region is experiencing a ‘resource curse’; however, socio-economic problems predate the oil boom, complicating any causality claim. To disentangle and estimate the effects of oil exploitation, we employ the synthetic control method that compares the actual trends of development indicators of Basilicata with a counterfactual that is created by taking a weighted average of trends of other Italian regions –a ‘synthetic’ Basilicata.The analysis finds that the development of oil operations has generated no detectable improvement to employment, nor to a range of social indicators, nor to educational attainment. The absence of quantifiable beneficial effects is coupled with negative impacts on other dimensions of development that are more difficult to estimate with our method –especially on the environment and human health. Taken together the evidence offers a sobering prospect over the potential of resource-based development for disadvantaged regions in developed countries.
Highlights
Basilicata is a region in the South of Italy that historically has been economically disadvantaged and the expansion of oil operations in the 1990s was promoted as an opportunity to change its development prospects
The first oil well was drilled in Basilicata already in 1921, but the much later exploitation of large oil reserves and the alleged opportunity to transform the economy of the region coincided with the construction of the Oil Processing Centre in Viggiano (Centro Olio Val D’Agri, COVA), which became operational in 1996 and completed to full capacity in 2001.1 The Centre processes oil, separating it from gas and formation waters, and since 2001 it is connected by a 138 km long pipeline that carries the oil to the Taranto (Apulia) refinery
The expansion of oil operations in the mid-1990s in Basilicata has been touted as an opportunity to change the course of development for a disadvantaged region of Southern Italy
Summary
Basilicata is a region in the South of Italy that historically has been economically disadvantaged and the expansion of oil operations in the 1990s was promoted as an opportunity to change its development prospects. The potential of extractives-led development rests on the expectation that the rents generated by extractives industries can propel the growth of non-resource based economic sectors. This paper adds to the incipient literature on the regional resource curse in developed countries, providing a sobering perspective on the potential of extractive industries to generate benefits in disadvantaged regions of developed countries. We provide an overview of the potential for extractive industries to contribute to socio-economic development; section 3 pro vides a succinct history of the oil sector in Basilicata; section 4 presents the quantitative methods and section 5 describes data and results. Sec tion 6 concludes and interprets our results with reference to the future of oil extraction in Basilicata and beyond
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