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Title: Essays on the links between natural resources, corruption, taxation and economic growth
Author: Veisi, Mohsen
ISNI:       0000 0004 6351 6813
Awarding Body: University of Manchester
Current Institution: University of Manchester
Date of Award: 2017
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This thesis studies the poor development performance of resource-rich developing economies, known as the resource curse. In the first chapter we provide a comprehensive literature review of the topic and the channels through which resource abundance can result in the resource curse. Issues of corruption and governance have been emphasised to be the main driver of the resource curse. This has been illustrated by a negative relationship between resource abundance and corruption control in the literature. However, there is a gap in how natural resources facilitate corruption. In the second chapter, using empirical analysis, we study the role of taxation in the relationship between natural resources and corruption. Taxation is usually seen as a social contract between citizens and government -- people pay taxes and in return they hold their government accountable for efficient allocation of their taxes. Resource abundance shifts the reliance of government from tax incomes to resource rents. People therefore, have no sustainable mechanism to hold their government responsible for corruption and wrongdoings inside public institutions. Using different econometric methods, Pooled OLS, Fixed Effects and 3SLS, our results show that natural resource revenues crowd out incomes from tax revenues. Meanwhile, taxation has a positive and significant impact on the control of corruption throughout our analysis. The results suggest that resource-rich developing countries should invest in building their tax systems to increase their non-resource tax revenues. This will increase state capacity and demand for accountability in the public sector among citizens and hence decreases corruption. Related to our second chapter, in the third chapter we study a cash transfer programme, known as oil-to-cash, which has gained support as a tool to re-establish taxation and fight corruption. Under such a plan, resource revenues are distributed directly among the public and then each citizen is taxed optimally. Through this, government relies directly and fully on its citizens for its income. Hence, taxation is reinstated and the social contract is revived. Within a general equilibrium model we show how this happens and what the implications are of the oil-to-cash programme for economic growth. Our results clearly show how corruption results in a resource curse. Furthermore, the model explains the variation that is seen in the degree of the resource curse across countries. The study also analyses the practical barriers of the oil-to-cash plan. The study suggests that parallel to (or even prior to) such a plan countries need to invest in building their tax system and increasing their administrative capacities.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available
Keywords: Natural resource curse ; Development ; Corruption ; Taxation ; Tax system ; State capacity ; Resource Rents ; Oil-to-Cash ; Economic growth