Reversing the Resource Curse: Foreign Corruption Regulation and the Local Economic Benefits of Resource Extraction

Abstract

We examine how foreign corruption regulation affects the economic benefits communities receive from extraction activities in the resource-rich areas of Africa. After a mid-2000s increase in enforcement of the US Foreign Corrupt Practices Act (FCPA), nighttime luminosity increases by 15 percent (5 percent) in communities within a 10-kilometer (25-kilometer) radius of affected extraction facilities. Cash-wage employment also increases significantly, suggesting that the economic benefits are not limited to electricity access. Consistent with foreign corruption regulation mitigating the political resource curse, we find that perceived corruption decreases following the rise in FCPA enforcement. (JEL D73, F23, K22, L14, O13, O17, Q31)