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

Cassidy, Traviss

doi:10.2139/ssrn.2701557

Cited by 1 publication

(4 citation statements)

References 13 publications

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“…As for the role of government spending itself, we have mentioned that Ross () found that oil producers spend more (not less) perhaps to elicit greater constituent loyalty, while Cassidy () argued the reverse. Table finds support for the Ross view.…”

Section: Resultsmentioning

confidence: 99%

“…This approach has a number of advantages that we will discuss later. The appropriateness of using oil reserves is extensively discussed in Cassidy (2016). This type of data is also used in a recent paper by Arezki et al (2017).…”

Section: F I G U R E 3 Hypotheses and Model Structurementioning

confidence: 99%

“…On this point the literature is conflicted. For example, Cassidy () argued that resource windfall reduces the marginal utility of public goods to policy‐makers, causing them to invest less in fiscal capacity, though he does not provide evidence while Ross () finds than more oil revenue may lead to increased public spending. Empirically, in our test, this issue is not an endogeneity problem but merely a colinearity issue.…”

Section: Estimation Strategymentioning

confidence: 99%

“…While Price does offer the possibility of exogeneity (except perhaps Saudi Arabia), it lacks cross‐country variations since the use of price shock ignores revenue variability which depends on quantity of oil extracted and does not reflect the countries’ differences in endowments. Cassidy () uses geologically determined oil basins to generate cross‐country variation in oil wealth. We also use this variable.…”

Section: Estimation Strategymentioning

confidence: 99%

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Kleptocracy and tax evasion under resource abundance

Mohtadi

Ross

Jarrett

et al. 2019

Economics & Politics

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Evidence has shown that petroleum wealth is associated with less transparency and at the same time less tax collection. In this paper, we find that the two issues are linked through the citizens’ tax evasion behavior. We develop a model to explain this link and conduct extensive empirical tests of its validity. The explanation is that officials tradeoff greater transparency to improve tax compliance against less transparency to increase gains from corruption. Oil windfalls diminish tax revenue needs, causing officials to optimize on less transparency. Seeing this, citizens optimize on a lower level of tax compliance. At equilibrium, both decline with a positive oil shock. We also study the alternative channel in which tax compliance responds to enforcement. Transparency is found to be the more robust channel. Ignoring citizens’ strategic behavior would lead to predicting suboptimal investment in state capacity for tax enforcement. Using giant oil discoveries data combined with oil price data, we develop a dynamic composite instrument and estimate the model with a dynamic panel system generalized method of moments. We find robust support for our explanation and the model's deep structure for 130+ countries and the 1980–2010 period.

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Section: Resultsmentioning

confidence: 99%

Section: F I G U R E 3 Hypotheses and Model Structurementioning

confidence: 99%

Section: Estimation Strategymentioning

confidence: 99%

Section: Estimation Strategymentioning

confidence: 99%

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