Reversing the Political Resource Curse: Accountability and Regional Favoritism Under Capital Windfalls

This paper examines how enhanced government accountability can mitigate the political resource curse during capital windfalls. We exploit two quasi-natural experiments in South Africa: the countrys 2012 inclusion in the Citigroup World Government Bond Index (WGBI) and the leak of a major corruption scandal twelve years earlier. Contrary to evidence linking resource booms to favoritism, we find that preferential grant allocations to municipalities connected to cabinet members declined following the sovereign inflow. Heightened salience of past corruption strengthened accountability, driving these results. Our findings underscore the critical role of accountability in promoting equitable resource distribution during financial inflows.