The Long-Run Effects of Oil Wealth on Democracy and Fiscal Capacity

2015 ◽  
Author(s):  
Traviss Cassidy
Keyword(s):  
Fiscal Capacity ◽  
Long Run ◽  
Oil Wealth

scholarly journals The Long-Run Effects of Oil Wealth on Development: Evidence from Petroleum Geology

2019 ◽  
Vol 129 (623) ◽  
pp. 2745-2778 ◽  
Author(s):  
Traviss Cassidy
Keyword(s):  
Political Institutions ◽  
Armed Conflict ◽  
Oil Production ◽  
Sedimentary Basins ◽  
Capacity Development ◽  
Fiscal Capacity ◽  
Internal Armed Conflict ◽  
Long Run ◽  
Per Capita ◽  
Oil Wealth

Abstract We estimate the long-run effects of oil wealth on development by exploiting spatial variation in sedimentary basins—areas where petroleum can potentially form. Instrumental variables estimates indicate that oil production impedes democracy and fiscal capacity development, increases corruption, and raises GDP per capita without significantly harming the non-resource sectors of the economy. We find no evidence that oil production increases internal armed conflict, coup attempts, or political purges. In several specifications failure to account for endogeneity leads to substantial underestimation of the adverse effects of oil, suggesting that countries with higher-quality political institutions and greater fiscal capacity disproportionately select into oil production.

Fiscal Institutions and Macroeconomic Management in the United Arab Emirates

2019 ◽  
pp. 356-426
Author(s):  
Raimundo Soto
Keyword(s):  
United Arab Emirates ◽  
Resource Curse ◽  
Political Stability ◽  
Institutional Development ◽  
Business Environment ◽  
Fiscal Rules ◽  
Fiscal Institutions ◽  
Long Run ◽  
Oil Wealth ◽  
Macroeconomic Management

The UAE has seemingly escaped “the natural resource curse”: it is one of the richest countries in the world and ranks comparatively highly on business environment, infrastructure, and institutional development. Symptoms of the curse can nevertheless be found in the very low growth in labor productivity, massive public sector overemployment, and the inability to counteract instability induced by oil price cycles. This chapter shows that fiscal policy is highly ineffective as a countercyclical tool due to the absence of income and ad-valorem taxes. Stabilizing instruments—such as open-budgeting procedures or fiscal rules—are notoriously absent. Why would a country design its fiscal, monetary, and exchange rate policies so that they allow for high levels of pro-cyclicality, thereby hampering efficiency and long-run growth? A political economy explanation is developed whereby weak fiscal institutions are an agreed-upon mechanism to secure political stability and transfer oil wealth among emiratis and to future generations.

scholarly journals Effect of Institutional Quality and Wealth from Oil Revenue on Economic Growth in Oil-Exporting Developing Countries

2019 ◽  
Vol 11 (13) ◽  
pp. 3635 ◽  
Author(s):  
Adewale Samuel Hassan ◽  
Daniel Francois Meyer ◽  
Sebastian Kot
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Institutional Quality ◽  
Linear Interaction ◽  
Distributed Lag ◽  
Oil Revenue ◽  
Long Run ◽  
Negative Effect ◽  
Short Run ◽  
Oil Wealth

This article investigates the role of institutional quality in the oil wealth–economic growth nexus for 35 oil-exporting developing countries between 1984 and 2016. To achieve this objective, an empirical model was employed with linear interaction between oil wealth and institutional quality, and estimated by means of panel autoregressive distributed lag (ARDL) with a dynamic fixed effect estimator. From the results, a contingent effect of oil wealth on economic growth, both in the long run and in the short run, was established. Specifically, institutional quality was found to mitigate the negative effect of oil wealth on economic growth in the long run, while in the short run, institutional quality was found to enhance the positive effect of oil wealth on economic growth. Furthermore, the results provide the threshold levels of institutional quality, beyond which oil wealth enhances economic growth, both in the long run and in the short run, for the sampled countries. These results suggest that in order for oil-exporting developing countries to benefit from an increase in oil wealth, they must adopt appropriate policy measures to improve their levels of institutional quality and embed their entire oil wealth-generating mechanism in a sound institutional framework. Also of importance is that governments must ensure sustainable development through the benefits of wealth from oil.

scholarly journals How do political institutions affect fiscal capacity? Explaining taxation in developing economies

2018 ◽  
Vol 15 (2) ◽  
pp. 351-380 ◽  
Author(s):  
ROBERTO RICCIUTI ◽  
ANTONIO SAVOIA ◽  
KUNAL SEN
Keyword(s):  
Political Institutions ◽  
Developing Economies ◽  
Institutional Development ◽  
Checks And Balances ◽  
Fiscal Institutions ◽  
Fiscal Capacity ◽  
Long Run ◽  
Sector Performance ◽  
Tax Systems ◽  
Robust Evidence

AbstractA central aspect of institutional development in developing economies is building tax systems capable of raising revenues from broad tax bases, i.e. fiscal capacity. While it is recognised that fiscal capacity is pivotal for state building and economic development, it is less clear what its origins are and what explains its cross-country differences. We focus on political institutions, seen as stronger systems of checks and balances on the executive. Exploiting a recent database on public sector performance in developing economies and an IV strategy, we estimate their long-run impact, distinguishing between the accountability and transparency of fiscal institutions (impartiality) and their effectiveness in extracting revenues. We find that stronger constraints on the executive foster the impartiality of tax systems. However, there is no robust evidence that they also improve its effectiveness. Our findings also suggest that the overall impact on both total tax revenues and income tax is economically relevant.

scholarly journals COVID-19, Fiscal Federalism and Provincial Debt: Have We Reached a Critical Juncture?

2020 ◽  
Vol 53 (2) ◽  
pp. 279-285 ◽  
Author(s):  
Kyle Hanniman
Keyword(s):  
Fiscal Federalism ◽  
Debt Crisis ◽  
Fiscal Sustainability ◽  
Fiscal Rules ◽  
Critical Juncture ◽  
Fiscal Capacity ◽  
Long Run ◽  
Canadian Federalism ◽  
The World

In 2019, Canada's gross subnational debt to GDP was well over 40 per cent, easily the highest in the world (see Figure 1). This level will only grow as the provinces grapple with the pandemic and its fiscal effects. Some believe surging provincial debts have brought Canadian federalism to a critical juncture: they have greatly increased the odds of federal measures to stabilize provincial finances. This article assesses this claim. The cleanest and most balanced path to fiscal sustainability is a combination of enhanced federal transfers, which would bolster provincial fiscal capacity, and national fiscal rules, which would constrain provincial borrowing. But the former is unlikely to restore sustainability on its own, and the latter would require a severe provincial debt crisis, which Canada's existing fiscal federal structures can avoid. COVID-19 has increased the odds of certain reforms, and it is difficult to predict their long-run effects. But any obvious paths to fiscal sustainability remain hidden.

scholarly journals La disuguaglianza economica in area marchigiana: uno studio di lungo periodo (1400-1800)

2020 ◽  
pp. 37-63
Author(s):  
Francesco Ammannati
Keyword(s):  
Middle Ages ◽  
Economic Inequality ◽  
The Political ◽  
Time And Space ◽  
Fiscal Capacity ◽  
Distribution Of Wealth ◽  
Late Middle Ages ◽  
Modern Age ◽  
Long Run ◽  
History Of

The research aimed at bringing new data to the study of inequality in the distribution of wealth in the long run using the fiscal documentation available to many communities of the Marches region over a period covering the late Middle Ages and the full modern age. The political-administrative history of this territory, progressively incorporated into the Papal State, was reflected in an evolution of the methodologies for assessing wealth for tax purposes. Their characteristics have been carefully taken into account and criticized in order to ensure compatibility in time and space. Land registers, “estimi”, "libre", as well as books of “collette”, will be used to describe the fiscal capacity of taxpayers enrolled in these registers and to estimate the dynamics of economic inequality.

Tax, Empire, and the Logic of Spanish Decline

2017 ◽  
Author(s):  
Mauricio Drelichman ◽  
Hans-Joachim Voth
Keyword(s):  
Fiscal Policy ◽  
The Other ◽  
Fiscal Capacity ◽  
Long Run ◽  
The Impact

This chapter examines the impact of debt leveraging on the long-run development of Castile. Compared to the other great European powers after 1500, Spain's fiscal policy showed no signs of imperial overstretch. Its finances were no worse—and better in a variety of ways—than those of other countries at the height of their power. According to several criteria, Castilian finances were managed with greater probity than even those of Britain, with primary surpluses being maintained during wartime and rapid improvements in the budget position when debts accumulated. There is also no evidence of the supposedly deleterious effects of serial default; after each payment stop, the Crown's revenues increased, suggesting no decline in fiscal capacity.

scholarly journals Weak States and Steady States: The Dynamics of Fiscal Capacity

2013 ◽  
Vol 5 (4) ◽  
pp. 205-235 ◽  
Author(s):  
Timothy Besley ◽  
Ethan Ilzetzki ◽  
Torsten Persson
Keyword(s):  
Public Goods ◽  
Tax Compliance ◽  
Preliminary Evidence ◽  
Common Interest ◽  
Weak States ◽  
Public Goods Provision ◽  
Weak State ◽  
Fiscal Capacity ◽  
Long Run ◽  
Public Resources

Investments in fiscal capacity—economic institutions for tax compliance—are an important feature of economic development. This paper develops a dynamic model to study the evolution of fiscal capacity over time. We contrast a social planner's investment path with politically feasible paths. Three types of states emerge in the long run: a common-interest state where public resources are devoted to public goods, a redistributive state where additional fiscal capacity is used for transfers, and a weak state with no transfers and a low level of public goods provision. We also present some preliminary evidence consistent with the theory. (JEL E23, E62, H23, H26, H41)

War, International Finance, and Fiscal Capacity in the Long Run

2019 ◽  
Vol 73 (4) ◽  
pp. 713-753 ◽  
Author(s):  
Didac Queralt
Keyword(s):  
International Finance ◽  
Power Sharing ◽  
Fiscal Capacity ◽  
Modern Times ◽  
Long Run ◽  
War Finance ◽  
Foreign Loans ◽  
Zero Sum ◽  
The Relationship

AbstractIn this article I revisit the relationship between war and state making in modern times by focusing on two prominent types of war finance: taxes and foreign loans. Financing war with tax money enhances the capacity to assess wealth and monitor compliance, namely fiscal capacity. Tax-financed war facilitates the adoption of power-sharing institutions, which transform taxation into a non-zero-sum game, carrying on the effect of war in the long run. Financing war with external capital does not contribute to long-term fiscal capacity if borrowers interrupt debt service and, as part of the default settlement, war debt is condoned or exchanged for nontax revenue. The empirical evidence draws from war around the world as early as 1816. Results suggest that globalization of capital markets in the nineteenth century undermined the association between war, state making, and political reform.

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