Is there a subnational resource curse? Evidence from households in the Niger Delta region of Nigeria

Abstract

Previous evidence suggests that mining-based extractive sectors have a net positive effect on local economies, further improving the local population’s living standards. In contrast to artisanal mining, we argue that hydrocarbon-based industries can have ambiguous implications on demand in sectors that will enhance local welfare. Using annual household data from the Niger Delta between 2010 and 2016, we utilize a combination of fixed effects and difference-in-differences, triple—differences (DDD), and treatment boundaries in oil production and households’ locations to produce unbiased estimates. Estimating at a subnational level allows us to exploit variation within a country, control for more potential sources of estimation bias, and measure the impact of compositional changes on households’ expenditures. We find that costs of living are higher by proximity to oil fields, but the mechanism is via the vicinity preferences for education. We find inconclusive evidence on other welfare indicators; limited employment opportunities and rent-seeking environment may explain the weak backward linkages and potential positive spillovers.