Mineral Wealth and Budget Transparency

Dec 21, 2011

How does a country’s mineral wealth affect the transparency of the government’s budget? Among democracies, a country’s mineral wealth is not convincingly related to the transparency of its government. But among autocracies, greater oil wealth is correlated with less fiscal transparency, while greater non-fuel mineral wealth is paradoxically associated with greater transparency. Explaining this pattern is a challenge: there is no prima facie evidence that it is driven by either membership in the Extractive Industries Transparency Initiative, or by the need to attract foreign investment. There is some evidence that among autocracies, oil reduces transparency because it helps dictators stay in power.