Resource discovery and the politics of fiscal decentralization

Bhattacharyya, Sambit, Conradie, Louis and Arezki, Rabah (2016) Resource discovery and the politics of fiscal decentralization. Working Paper. Centre for the Study of African Economies, University of Oxford, Oxford, UK.

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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.

Item Type: Reports and working papers (Working Paper)
Schools and Departments: School of Business, Management and Economics > Economics
Subjects: H Social Sciences > HB Economic theory. Demography
H Social Sciences > HB Economic theory. Demography > HB0071 Economics as a science. Relation to other subjects
Depositing User: Sambit Bhattacharyya
Date Deposited: 22 Sep 2016 11:43
Last Modified: 22 Sep 2016 11:54
URI: http://sro.sussex.ac.uk/id/eprint/63528

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