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Resource discovery and the politics of fiscal decentralization

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posted on 2023-06-09, 03:04 authored by Sambit BhattacharyyaSambit Bhattacharyya, Louis Conradie, Rabah Arezki
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.

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Publication status

  • Published

File Version

  • Published version

Publisher

Centre for the Study of African Economies, University of Oxford

Pages

40.0

Place of publication

Oxford, UK

Department affiliated with

  • Economics Publications

Institution

Centre for the Study of African Economies, University of Oxford

Full text available

  • Yes

Legacy Posted Date

2016-09-22

First Open Access (FOA) Date

2016-09-22

First Compliant Deposit (FCD) Date

2016-09-22

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