Resource abundance and public finances in five peripheral economies, 1850-1939

Produced by: 
Available from: 
November 2020
Paper author(s): 
José Peres-Cajías
Sara Torregrosa-Hetland
Cristian Ducoing
Fiscal Policy - Public and Welfare Economics

The resource curse literature has established that the taxation of natural resources might limit the long-term development of fiscal capacity in resource-rich countries. This article explores if, and how, natural resource abundance generates fiscal dependence on natural resource revenues. We compare five peripheral economies of Latin America (Bolivia, Chile, Peru) and Scandinavia (Norway, Sweden) over a period of 90 years, between 1850 and 1939. Both groups were natural resource abundant, but in the latter natural resource dependence decreased over time. By using a novel database, we find that fiscal dependence was low in Norway and Sweden, while high and unstable in Bolivia, Chile and Peru. This suggests that natural resource abundance should not be mechanically linked to fiscal dependence. An accounting identity shows that sudden increases in fiscal dependence were related to both economic and political factors: countries’ economic diversification, and attitudes of the relevant political forces about how taxation affects the companies operating in the natural resource sector.


Research section: 
Latest Research
Share this