Natural resource abundance is a blessing for some countries, but a curse for others. We show that differences across countries in the degree of fiscal decen-tralization can contribute to this divergent outcome. The paper first employs Sachs and Warner’s cross-sectional data and finds support for the novel hypoth-esis. Then, it constructs a new panel-data sample that confirms the results. We also offer a theory of inter-regional tax competition that rationalizes the find-ings. The theory emphasizes misallocations caused by the lack of co-movement of labor and capital towards less agglomerated and more isolated areas where natural riches are located
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