Mr. Tiago Cavalcanti, Daniel Da Mata, and Mr. Frederik G Toscani
This paper provides evidence of the causal impact of oil discoveries on development. Novel data on
the drilling of 20,000 oil wells in Brazil allows us to exploit a quasi-experiment: 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 per capita GDP and
urbanization. We find positive spillovers to non-oil sectors, specifically, an increase in services GDP
which stems from higher output per worker. The results are consistent with greater local demand for
non-tradable services driven by highly paid oil workers.