University of Sussex
Keller, Michael.pdf (1.78 MB)

Gold-diggers and where to find them : the political economy of natural resources

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posted on 2023-06-09, 17:24 authored by Michael Keller
This thesis analyses the political economy of natural resources and investigates how natural resources influence political survival, taxation and inefficiency in the health care sector. The first chapter investigates the causal effects of giant and first oil and mineral discoveries on the political fortunes of national leaders using a large dataset of 1255 leaders from 158 countries over the period 1950 to 2010 in ‘single risk’ and ‘competing risk’ discrete time proportional hazard models. The results show that mineral discoveries reduce risk for the incumbent in a ‘single risk model’ especially in non-election years. In contrast, oil discoveries reduce risk disproportionately more in countries with weak political institutions. In a ‘competing risk model’, oil discovery significantly reduces the risk of departure via military coup while resource discovery reduces the risk of resignation. Non-resource tax and military expenditure appears to be two potent mechanisms through which oil discovery affects political survival. The second chapter exploits the 2000s commodity price boom to identify the impact of resource revenues on domestic taxation in resource exporting countries. I estimate the average effect of resource revenues on non-resource taxation for 25 resource exporting countries using synthetic control methodology. Non-resource tax per capita is on average 11% lower in resource exporting countries because of the 2000s commodity price boom compared to a scenario without price shock. However, I also show that the effect is heterogeneous and occurs only in oil exporting countries but not in mineral or precious mineral exporting countries. Within the sample of oil exporting countries, the tax reducing effect persists only in countries with a low level of institutional quality, are highly oil dependent and prefer the use of tax instruments rather than non-tax instruments. The third chapter uses stochastic frontier analysis (SFA) to determine whether oil rents drive inefficiency in the health care sector. SFA simultaneously estimates a production function for health outputs and the determinants of inefficiency in production. Using a sample of 119 countries covering the period 2000 to 2015, unexpectedly high oil revenues are shown to increase inefficiency. Oil rents hinder countries in reaching their potential life expectancy. Exploiting exogenous variation in the international oil price reveals that causality runs from oil rents to inefficiency in democratic countries. The effect varies with institutions, sex and age. The effect is more pronounced in democracies, and women and children are affected more than men and adults. Transparency and inequality are potential mechanisms.


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University of Sussex

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