1 The Political Effects of Resource Booms: Political Outcomes, Clientelism and Public Goods Provision in Peru * Stanislao Maldonado ** University of California, Berkeley This version: September, 2014 (first version: September 2013) Abstract This study uses variation in natural resource rents and mineral production among Peruvian municipalities to analyze the impact of resource booms on local politicians’ behavior and citizens’ well-being. Although this topic has recently attracted several scholars, the existing empirical evidence remains inconclusive regarding whether resource booms are beneficial or detrimental to citizens via their effects on public good provision and welfare outcomes. I argue that, despite the fact that many of the existing theoretical models allow for the possibility of non-monotonic responses, the empirical literature has mostly approached this phenomena using linear models, failing to correctly understand the nature of resource booms. Exploiting the recent extraordinary increase in mineral prices along with a set of rules for the distribution of natural resource rents in Peru, I show that the effects of resource booms in reelection outcomes, political competition, and public goods provision are conditional to the size of the rents in a non-monotonic fashion. These results are robust to endogenous production responses and are consistent with a simple model of electoral competition in a resource rich economy. Keywords: resource booms, political competition, reelection, intergovernmental transfers. * A preliminary version circulated under the title “The Political Effects of Resource Abundance: Evidence from Peru”. I appreciate the advice of Elisabeth Sadoulet during the development of this project and comments by Micheal Anderson, Lee Behman, David Collier, Ruth Collier, Alain de Janvry, Larry Karp, Fred Finan, Ethan Ligon, Jeremy Madruger, Ted Miguel, John Nye, Mary Shirley, Alberto Simpser, Jas Sekhon, Colin Xu and seminar participants at the Ronald Coase Institute institutional workshop at University of Chicago, Development Workshop and Environment and Resource Economics seminar at UC Berkeley. Tania Lozano, Sarita Ore and Victor Huamani provided excellent research assistance. I am grateful for a research grant from ACDI/IDRC-Economic and Social Research Consortium. All remaining error is my responsibility. ** Correspondence: Department of Agriculture and Resource Economics, 207 Giannini Hall, University of California, Berkeley, CA 94720-3310.E-mail: smaldonadoz@berkeley.edu.