Resource Discovery and the Politics of Fiscal Decentralization

Sambit Bhattacharyya, Louis Conradie and Rabah Arezki

No 2016-05, CSAE Working Paper Series from Centre for the Study of African Economies, University of Oxford

Abstract: If the central government is a revenue maximizing Leviathan then resource discovery and democratization should have a discernible impact on the degree of fiscal decentralization. We systematically explore this effect by exploiting exogenous variation in giant oil and mineral discoveries and permanent democratization. Using a global dataset of 77 countries over the period 1970 to 2012 we find that resource discovery has very little effect on revenue decentralization but induces expenditure centralization. Oil discovery appears to be the main driver of centralization and not minerals. Resource discovery leads to centralization in locations which have not experienced permanent democratization. Tax and intergovernmental transfers respond most to resource discovery shocks and democratization whereas own source revenue, property tax, educational expenditure, and health expenditure do not seem to be affected. Higher resource rent leads to more centralization and the effect is moderated by democratization.

Keywords: Resource discovery; Resource rent; Democratization; Fiscal decentralization (search for similar items in EconPapers)
JEL-codes: H41 H70 O11 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-ene, nep-pbe and nep-ure
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Related works:
Journal Article: Resource discovery and the politics of fiscal decentralization (2017)
Working Paper: Resource Discovery and the Politics of Fiscal Decentralization (2016)
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