Abstract
By encouraging socially wasteful rent seeking and corruption, natural resources abundance might not be a blessing but a country’s curse. A recent attempt to impede these practices of corruption with theft is the Extractive Industries Transparency Initiative (EITI). The purpose of this organization is to verify and fully publish company payments and government revenues from oil, gas, and mining. Using a probit estimation technique the paper analyses empirically the political and socio-economic factors which determine a country’s participation in EITI, which can be interpreted as revealed willingness to reform.
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Notes
See Kolstad and Wiig (2009) for a comprehensive survey of reasons why low transparency might lead to high corruption, many of which are not relevant here, however, as we only deal with transparency of resource revenues.
Alternatively, IMF (2007), Appendix I, lists 31 resource-rich non-OECD countries that were not participants in the EITI process in January 2008.
These initiating countries were: Chad, Democratic Republic of Congo, Equatorial Guinea, Madagascar, Republic of Congo, Sao Tome and Principe, Sierra Leone, Trinidad and Tobago, and Timor-Leste. Candidate countries as of November 2007 were Azerbaijan, Cameroon, Gabon, Ghana, Guinea, Kazakhstan, Kyrgyzstan, Liberia, Mali, Mauritania, Mongolia, Niger, Nigeria, Peru, and Yemen. In February 2008, 7 “initiating countries” actually became “candidates”.
This does not mean that they have been found guilty of window dressing at the time when EITI was joined or later; slow progress might be due to other factors (like the general election held in Trinidad and Tobago in fall 2007, but this is speculative). Chad was dropped from our regressions anyway due to missing data.
On the other hand, transparency should complement accountability, as it facilitates relating misconduct to a certain individual (Boehm and Olaya, 2006, p.440).
As far as EITI membership is a means of window dressing, there is no reason why this hypothesis should hold. This is one mechanism how window dressing, unobservable to us, might increase the error term.
In ancillary regressions, available upon request, we also tried EITIcandidate (1 if the country is a candidate country, and 0 otherwise), EITIearly (1 if the country attended the EITI Lancaster House Conference in June 2003), and EITIsteps (2 for candidate countries, 1 for initiating countries and 0 otherwise for ordered probit), with qualitative results being no different from our current ones, though EITIearly led to a markedly worse fit.
Data are not available for Equatorial Guinea, Liberia, Chad, Democratic Republic of Congo and Timor-Leste.
We excluded all OECD members and EU member countries, as well as oversea territories of France (DOM-TOM).
As one referee suggested, a further caveat might be that more corrupt countries are EITI target countries, and hence it should not come as a surprise that higher levels of (political) corruption increase the probability of participation. We cannot rule out that argument completely, although the EITI is formally not exclusively designed to address the most corrupt countries, but resource-rich countries instead. Resource-abundance and corruption indices are not correlated, however. Moreover, it seems unlikely that ‘corrupt countries’ be more likely to join the EITI simply because they are targeted countries.
No data are available for years closer to 2006.
Postscript: In 2009, it did.
But see a recent pessimistic assessment of the progress to be expected from EITI by Kolstad and Wiig (2009, section 6–7).
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We are indebted to the editor, two anonymous referees, Martin Gassebner, Johann Graf Lambsdorff, Roland Menges, Martin Paldam, Friedrich Schneider, Stanley Winer, conference participants at the Public Choice Society 2008 Meetings in San Antonio and Jena, as well as seminar participants at Clausthal and Dresden, especially Mathias Erlei and M. Reza Farzanegan, for very helpful comments, and to Beverley Locke for polishing the style.
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Pitlik, H., Frank, B. & Firchow, M. The demand for transparency: An empirical note. Rev Int Organ 5, 177–195 (2010). https://doi.org/10.1007/s11558-009-9073-6
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DOI: https://doi.org/10.1007/s11558-009-9073-6