Essays on the political economy of extractive-led development

Fenton Villar, Paul (2022) Essays on the political economy of extractive-led development. Doctoral thesis, University of East Anglia.

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This thesis aims to contribute to the research enhancing our understanding of extractive-led development and policy in the following four empirical chapters. The first empirical chapter [chapter 2] of the thesis is devoted to helping extend current thinking on the potential effects of this extractive-based development imperative on citizens expectations and life satisfaction. This draws on a contemporary stream of economic literature pointing to the ‘psychological effects’ of the mineral sector. Here theory speculates that the economic potential of the mineral sector may inflate citizens’ economic expectations and, due to an upward shift in aspirations, cause a degree of dissatisfaction. Using survey data from 18 Latin American countries, this chapter presents a novel econometric analysis documenting the presence of the ‘euphoric effect’ of the mineral sector on citizens’ economic expectations. However, it does not detect a significant relationship with citizens’ reported life satisfaction.

Next, despite the heightened rhetoric about the potential economic benefits of extraction, over the last two decades, there has also been increasing interest within the scientific community on the ‘resource curse’ and the governance issues arising in the extractive sector. Consequently, much hope has been placed on the creation of ‘good governance standards’ in transparency and accountability as a means to help combat these problems. This has culminated in the rise of the Extractive Industries Transparency Initiative (EITI), which is now recognised as the leading international standard and hallmark transparency scheme in the extractive sector. The EITI requires its member countries to abide by financial and contractual disclosure standards, maintain a public feedback mechanism in the form of a national multi-stakeholder group, and the initiative also uses an audit system to validate members’ compliance with its disclosure standards and ensure its transparency requirements are upheld properly.

Chapter 3 presents a novel assessment of the relationship between EITI membership and countries’ progress in tackling corruption. It provides the first study looking at this issue using a ‘state of the art’ indicator called the Bayesian Corruption Indicator (BCI). It also introduces an innovative estimation strategy combining Entropy Balancing with a Difference-in-Difference framework to address the baseline inequalities that exist between member and non-member countries. Contrary to the findings of many leading studies, this analysis finds corruption scores have improved significantly among EITI member countries. In particular, the evidence is strongest when we examine a sub-group of EITI members designated fully compliant with the initiative’s transparency standards.

Chapter 4 continues exploring the purported benefits of the adoption and implementation of the EITI. Here it examines the EITI’s role in helping build trust in politicians. In doing so, it presents the first known econometric investigation studying the relationship between the EITI and trust. It also uses a novel instrument exploiting the variation in neighbouring countries’ EITI participation to control for the endogenous nature of one’s own EITI involvement. The basis of this instrument reflects on a broader literature concerning the historic influence of policy borrowing in the geographical diffusion of public policies. The results show a positive relationship between countries’ EITI membership and trust in politicians. In particular, estimates offer consistent evidence of significantly improved levels of trust among members that are compliant with the EITI’s transparency standards.

Following on from this, it is discussed that a central assertion underpinning transparency initiatives in the extractive industries is that they can generate and sustain demand for information about the sector. However, very little is currently known about the demand for information following concerted efforts to enhance transparency in the extractives sector or about the factors that are related to the variation in demand for information (i.e. considering when and where demand accrues). Using a new dataset on global demand for information from the website of the EITI, Chapter 5 provides a novel study tracking demand for information from a transparency initiative in the extractive industries both through time and across different countries. Overall, it finds aggregate global demand for information follows secular patterns in global mineral prices. This highlights the potential susceptibility of the initiative to trends in the public’s policy interests. Cross-country regressions also show that demand for information appears to be higher among wealthier, more open economies with lower perceived levels of corruption and higher levels of accountability. This contrasts with the expected beneficiaries of the EITI scheme and it points to the need for improved communication strategies that target countries with weaker and challenging institutional settings.

The thesis concludes in Chapter 6 with a discussion of this research. It includes a discussion of its main findings and the policy-related points it raises. It also considers further some of the caveats and limitations of this research. With this in mind, it points towards future avenues for research and opportunities to continue to progress this research agenda on extractive-led development, the role of transparency and accountability policy in the governance of the sector, and the methodological issues that have arisen during the process of completing this thesis.

Item Type: Thesis (Doctoral)
Faculty \ School: Faculty of Social Sciences > School of Global Development (formerly School of International Development)
Depositing User: Chris White
Date Deposited: 23 Nov 2022 14:31
Last Modified: 23 Nov 2022 14:31


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