The Effects of Oil and Mineral Taxation on Non-commodity Fiscal Revenues

Guillermo Perry and Sebastián Bustos

No 4062, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: This paper shows, first, that non-commodity revenues are more volatile in oil- and mineral-rich countries and that quality of institutions is associated with lower volatility. We investigate the channels through which oil and mineral revenue volatility lead to non-commodity revenues volatility, and find that when oil and fiscal revenues increase (decrease), non-commodity revenues are reduced (increased) discretionally, and that this substitution effect is larger and faster than an indirect positive income effect through increased public expenditures and GDP. Latin American oil- and mineral-rich countries appear, though, to behave differently. In particular, most of them show increased non-commodity revenues pari passu with increased oil and mineral revenues during the last decade. These findings have consequences for the overall volatility of public expenditures and the effectiveness of automatic tax stabilizers in oil- and mineral-rich countries.

Keywords: Natural resources; Windfall public revenues; Natural resource curse; Optimal fiscal policy (search for similar items in EconPapers)
JEL-codes: F43 H21 H25 H50 H63 O11 Q30 Q33 (search for similar items in EconPapers)
Date: 2012-09
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Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:4062

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