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Does the political resource curse affect public finance? The vulnerability of tax revenue in resource-rich countries

Christian von Haldenwang () and Maksym Ivanyna

No 7, WIDER Working Paper Series from World Institute for Development Economic Research (UNU-WIDER)

Abstract: This paper explores the extent to which government revenue is affected by external shocks, and whether these effects are different for resource-rich as compared with non-resource-rich countries. We are particularly interested in the fate of poorer countries, as we assume they will find it more difficult to implement the policies needed to offset the effect of shocks. Based on data from the International Centre for Taxation and Development Government Revenue Dataset for 1980–2010, we measure the elasticity of tax revenue with respect to terms-of-trade shocks. We find that revenue in resource-rich countries is more vulnerable to such shocks. Interestingly, it is above all the richer countries that appear to be adversely affected. Also, resource-rich countries became less vulnerable in the 2000s as compared with previous decades. When we look at the poorer resource-rich countries, we find that a country’s general institutional characteristics may not always reflect the quality of its management of natural resources.

Keywords: taxes; natural resources; terms-of-trade shocks; developing countries; government revenue; volatility (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-env and nep-pbe
Date: 2017
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