PhD defence: Harouna Kinda

The Political Economy of Extractives Governance and Sustainable Development Finance: Does Transparency Pay?

Harouna Kinda
CERDI, Université Clermont Auvergne
Université Hassan II de Casablanca (UH2C)

Jury 

Ahmed Tritah, Professor, Université de Poitiers
Abdellatif Komat, Professor, Université Hassan II de Casablanca
Samuel Guérineau, Associate Professor, Université Clermont Auvergne
Fouzi Mourji, Professor, Université Hassan II de Casablanca (UH2C)
Grégoire Rota-Graziosi, Professor, Université Clermont Auvergne

Abstract

The 2030 Agenda from the International Conference on Financing for Sustainable Development in Addis Ababa highlighted the priority of all national and international resource flows, policies, and agreements with economic, social, and environmental stresses. Resource-rich developing countries (RRDCs) are encouraged to focus on transparency and governance in the extractive industries in order to improve domestic resource mobilization (DRM). This thesis investigates the environmental and economic impacts of the political economy of extractive industry governance in resource-rich developing countries. Chapter 1 revisits the links between man-made and natural capital in developing countries, focusing on the case of forest cover loss. Considering a theoretical model of income maximization, we assess through empirical observation the impact of extractive industries on forest cover loss. Based on a panel of 52 resource-rich developing countries from 2001-2017, we adopt a dynamic specification with the two-step Generalized Method of Moments (GMM) system to address the inherent bias. Our main results show that the total rent from the extractive industries harms the forest. In contrast, oil rents contribute to reducing forest cover loss. In addition, we find that natural resource tax revenues contribute to reducing forest cover loss. Chapter 2 assesses the "treatment effect" of implementing the Extractive Industries Transparency Initiative (EITI) standard on deforestation in resource-rich developing countries. Using a sample of 83 resource-rich developing countries from 2001–to 2017, we use entropy balancing methods to address the self-selection bias associated with EITI membership. Compared with the non-EITI country, the results show that implementing the EITI standard significantly reduces the loss of forest cover by approximately 300–760 ha. This result supports the conclusion that EITI, but not a panacea, is an effective policy program for limiting the negative impacts on forests partly caused by extractive industries. Chapter 3 assesses the "treatment effect" of the Extractive Industries Transparency Initiative (EITI) membership on tax revenues through two main channels. The first (direct effect) works through an equitable and transparent resource tax regime. The second is the indirect effect EITI has on non-resource revenue once transparency enhances accountability and resource allocation to productive expenditures. Using a sample of 83 resource-rich developing countries from 2001 to 2017, we use propensity score matching (PSM) and a control function approach to address the self-selection bias associated with EITI membership (the dates of countries' commitment, candidacy, and compliance). Results show that EITI commitment or candidates significantly and positively affect tax revenue collection compared to non-EITI. EITI compliance generates a considerable surplus of tax revenues compared to noncompliance. The results are robust, with a substantial increase in non-resource tax revenues, income tax, and resource tax revenue. Chapter 4 hypothesizes that the Extractive Industries Transparency Initiative, an international norm that aims to promote transparency in natural resources management, may mitigate this negative impact. We empirically support this hypothesis using the Fixed-Effects and Entropy Balancing methods in a panel of 71 resource-rich countries, including 30 EITI and 41 non-EITI countries, between 1995 and 2019. Our results are robust to using different sets of controls and alternative measures of financial development. In addition, we discuss the transmission channels through which the financial resource curse may occur.

Keywords

Extractive industries, Governance, Sustainable Development Finance, Transparency, EITI, Impacts Evaluation