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Bargaining Matters: Taxation and Public Service Provision Under Natural Resource Revenue Sharing Arrangements

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Presentation by Belinda Archibong at the second annual Nigerian Tax Research Network meeting which took place in Abuja on 24th and 25th November 2018.

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Bargaining Matters: Taxation and Public Service Provision Under Natural Resource Revenue Sharing Arrangements

  1. 1. Bargaining Matters: Taxation and Public Service Provision Under Natural Resource Revenue Sharing Arrangements Belinda Archibong (Barnard College) October 21, 2018 Belinda Archibong (Barnard College) Bargaining Matters: Taxation and Public Service Provision Under Natural Resource ReveOctober 21, 2018 1 / 1
  2. 2. Introduction and Conceptual Framework Motivation and Background Natural Resource Revenue Sharing Arrangements Growing Around the World Belinda Archibong (Barnard College) Bargaining Matters: Taxation and Public Service Provision Under Natural Resource ReveOctober 21, 2018 2 / 1
  3. 3. Introduction and Conceptual Framework Motivation and Background Motivation: Determinants of Distribution of Tax Revenue from Natural Resource Sharing Arrangements Over 30 countries in world, natural resource abundant, distribute tax receipts from natural resources acc to predetermined formulas/revenue sharing arrangements (UNDP, 2016) Literature thin on understanding determinants of distribution of revenue among constituents under schemes Belinda Archibong (Barnard College) Bargaining Matters: Taxation and Public Service Provision Under Natural Resource ReveOctober 21, 2018 3 / 1
  4. 4. Introduction and Conceptual Framework Motivation and Background Motivation: Determinants of Distribution of Tax Revenue from Natural Resource Sharing Arrangements Over 30 countries in world, natural resource abundant, distribute tax receipts from natural resources acc to predetermined formulas/revenue sharing arrangements (UNDP, 2016) Literature thin on understanding determinants of distribution of revenue among constituents under schemes Also relationship between revenue allocation and public service provision understudied, empirical question- public service provision and development (Besley and Ghatak, 2006) Belinda Archibong (Barnard College) Bargaining Matters: Taxation and Public Service Provision Under Natural Resource ReveOctober 21, 2018 3 / 1
  5. 5. Introduction and Conceptual Framework Motivation and Background Motivation: Determinants of Distribution of Tax Revenue from Natural Resource Sharing Arrangements Over 30 countries in world, natural resource abundant, distribute tax receipts from natural resources acc to predetermined formulas/revenue sharing arrangements (UNDP, 2016) Literature thin on understanding determinants of distribution of revenue among constituents under schemes Also relationship between revenue allocation and public service provision understudied, empirical question- public service provision and development (Besley and Ghatak, 2006) Motivators: revenue sharing from natural resources to promote economic development- avoid ”resource curse”, raise standards of living, contribute to equatable development, compensate mining areas for env. and social damage from natural resource depletion (UNDP, 2006; Herbst, 2001). Avoid resource related conflict (Humphreys, 2005; UNDP, 2006; Bannon and Collier, 2003). Central for natural resource abundant states, robust literature on fiscal decentralization more generally, relatively little known about what affects subnational rev. allocation and rel. bet revenue allocation and public service provision in natural resource rich contexts (Ahmad and Singh, 2003; UNDP, 2006; Agustina et al., 2012) Belinda Archibong (Barnard College) Bargaining Matters: Taxation and Public Service Provision Under Natural Resource ReveOctober 21, 2018 3 / 1
  6. 6. Introduction and Conceptual Framework Motivation and Background Motivation: Determinants of Distribution of Tax Revenue from Natural Resource Sharing Arrangements Over 30 countries in world, natural resource abundant, distribute tax receipts from natural resources acc to predetermined formulas/revenue sharing arrangements (UNDP, 2016) Literature thin on understanding determinants of distribution of revenue among constituents under schemes Also relationship between revenue allocation and public service provision understudied, empirical question- public service provision and development (Besley and Ghatak, 2006) Motivators: revenue sharing from natural resources to promote economic development- avoid ”resource curse”, raise standards of living, contribute to equatable development, compensate mining areas for env. and social damage from natural resource depletion (UNDP, 2006; Herbst, 2001). Avoid resource related conflict (Humphreys, 2005; UNDP, 2006; Bannon and Collier, 2003). Central for natural resource abundant states, robust literature on fiscal decentralization more generally, relatively little known about what affects subnational rev. allocation and rel. bet revenue allocation and public service provision in natural resource rich contexts (Ahmad and Singh, 2003; UNDP, 2006; Agustina et al., 2012) Paper seeks to answer “how do resource rich regimes distribute tax revenues from natural resources under revenue sharing arrangements?” and specifically the role of citizen collective action in revenue sharing schemes Relationship bet. revenue alloc. from arrangements and local public service provision? Belinda Archibong (Barnard College) Bargaining Matters: Taxation and Public Service Provision Under Natural Resource ReveOctober 21, 2018 3 / 1
  7. 7. Introduction and Conceptual Framework Motivation and Background Preview of Results: Determinants of Distribution of Tax Revenue from Natural Resource Sharing Arrangements- Bargaining Power, Citizen Collective Action- and Public Service Provision Construct simple framework of bargaining between federal and subnational actors under revenue sharing arrangements in natural resource abundant settings. Obj f-n of center- max rev ext., maintain order, min coups, rebellion Argue bargaining power of agent important determinant of rev. allocation. Riots as citizen collective action and regime signaling (esp in autocratic contexts). Test implications of framework with evidence from novel dataset of revenue sharing allocations and local public service provision from military Nigeria (data over 1979 to 1999) and historical research Belinda Archibong (Barnard College) Bargaining Matters: Taxation and Public Service Provision Under Natural Resource ReveOctober 21, 2018 4 / 1
  8. 8. Introduction and Conceptual Framework Motivation and Background Preview of Results: Determinants of Distribution of Tax Revenue from Natural Resource Sharing Arrangements- Bargaining Power, Citizen Collective Action- and Public Service Provision Construct simple framework of bargaining between federal and subnational actors under revenue sharing arrangements in natural resource abundant settings. Obj f-n of center- max rev ext., maintain order, min coups, rebellion Argue bargaining power of agent important determinant of rev. allocation. Riots as citizen collective action and regime signaling (esp in autocratic contexts). Test implications of framework with evidence from novel dataset of revenue sharing allocations and local public service provision from military Nigeria (data over 1979 to 1999) and historical research Results show subnational regions with more bargaining power vis-a-vis the center or federal government, as reflected in the ability of citizens to organize through local protests or riots, particularly in non-petroleum regions, have higher levels of allocated state revenue and expenditure in revenue sharing arrangements under Nigeria’s military rule. Results on riots hold for state allocations not LGA allocations. State- military appointed governors. LGA- democratically appointed heads- Riots as signaling (esp w/o elections) Belinda Archibong (Barnard College) Bargaining Matters: Taxation and Public Service Provision Under Natural Resource ReveOctober 21, 2018 4 / 1
  9. 9. Introduction and Conceptual Framework Motivation and Background Preview of Results: Determinants of Distribution of Tax Revenue from Natural Resource Sharing Arrangements- Bargaining Power, Citizen Collective Action- and Public Service Provision Construct simple framework of bargaining between federal and subnational actors under revenue sharing arrangements in natural resource abundant settings. Obj f-n of center- max rev ext., maintain order, min coups, rebellion Argue bargaining power of agent important determinant of rev. allocation. Riots as citizen collective action and regime signaling (esp in autocratic contexts). Test implications of framework with evidence from novel dataset of revenue sharing allocations and local public service provision from military Nigeria (data over 1979 to 1999) and historical research Results show subnational regions with more bargaining power vis-a-vis the center or federal government, as reflected in the ability of citizens to organize through local protests or riots, particularly in non-petroleum regions, have higher levels of allocated state revenue and expenditure in revenue sharing arrangements under Nigeria’s military rule. Results on riots hold for state allocations not LGA allocations. State- military appointed governors. LGA- democratically appointed heads- Riots as signaling (esp w/o elections) Rel. bet. subnational rev. allocation and expenditure and local public service provision unstable, more ambiguous- might not always translate to more public service provision. Strong correlations with night lights (private provision?) Belinda Archibong (Barnard College) Bargaining Matters: Taxation and Public Service Provision Under Natural Resource ReveOctober 21, 2018 4 / 1
  10. 10. Introduction and Conceptual Framework Motivation and Background Nigeria, States, Zones, LGAs Belinda Archibong (Barnard College) Bargaining Matters: Taxation and Public Service Provision Under Natural Resource ReveOctober 21, 2018 5 / 1
  11. 11. Historical Background Revenue Sharing Arrangements under Military Nigeria, 1960-1980 Contentious history of rev. sharing arrangements in Nigeria back to colonial era, 1914-1960 (Philips, 1991) Discovery of oil in 1956, ind. in 1960, civil war over resources, 3 decades of military rule 1976-1999. 3 tier system of govt- fed, state, LGA (Uche and Uche, 2004; Suberu, 2009) Oil boom 1970s, shift structure of fed rev to petrol. New concerns about rev. sharing scheme to be adopted at 3 tiers Vertical alloc- Fed- 60% Fed, State- 30% bet. 1970-1977- DPA, Horiz. alloc- derivation principle- pop. size, ’equality of states’ or state need (Ahmad and Singh, 2003; Okauru, 2012; Salami, 2011) Civilian rule (1979-83), Aboyade Committee (1977) to depoliticize process, DPA to Fed. Acct. Okigbo Commission (1980)- allow funds for LGAs, special funds to oil producing states. Duties of fed- ext rel etc, state- second and primary ed, health, urban water, housing etc; LGA- primary ed., sewage disposal, market stalls. State and local- issue tax and license fees, but most rev. from Fed allocation States- appointed military governors; LGAs- democratically elected since 1976 reforms Belinda Archibong (Barnard College) Bargaining Matters: Taxation and Public Service Provision Under Natural Resource ReveOctober 21, 2018 6 / 1
  12. 12. Historical Background Share of direct and indirect taxes in tax and government revenue, 1933-1980 Figure: Share of direct and indirect taxes in tax and government revenue, 1933-1980. Source: Data from Nigeria Digest of Statistics, multiple; Hicks(1951)Belinda Archibong (Barnard College) Bargaining Matters: Taxation and Public Service Provision Under Natural Resource ReveOctober 21, 2018 7 / 1
  13. 13. Historical Background Revenue Sharing Arrangements under Military Nigeria, 1980-1999 Mil rule in 1983, decline in fin. pos. of states 35% (1983) to 24% (1992). More state creation bet. 1987-1996- local agent agitation for access to rev. from Fed. acct. Allocation to LGAs inc from 10% to 20% over same period. 6 geopolitical zones and ethnic inequality considerations Oil price declines in 1980s and 1990s, reduced allocation to states and LGAs SAPs, organized protests and riots by post secondary students, labor and trade union- contentious horiz rev. allocation issue Pop. size and ’equality of states’ over 80% of rev. allocation bet. 1970 and 1980, pop. 50% of grants to states. 1981- pop. 40%, 30% in 1990. Land and terrain 10% (Northern, oil delta agitation) Military response to agitation violent, but concessions sometimes made for certain regions (Shettima, 1993) Military sensitive to local agitation and risk of overthrow in coups- military speeches emphasize maintain social order (Bratton and Van de Walle, 1992; Babangida, 1989) Belinda Archibong (Barnard College) Bargaining Matters: Taxation and Public Service Provision Under Natural Resource ReveOctober 21, 2018 8 / 1
  14. 14. Historical Background Log Real Oil Prices, Riots and Real State and LGA Revenue Allocation, 1979-1999 2.5 3.0 3.5 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Year LogRealOilPrice Oil Prices, 1979−1999, Nigeria −2 0 2 4 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Year LogRiots Log Total Riots, 1979−1999, Nigeria 8.5 9.0 9.5 10.0 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Year LogRealLGAAllocation Average LGA Allocation, 1979−1999, Nigeria 9.0 9.5 10.0 10.5 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Year LogRealStateAllocation Average State Allocation, 1979−1999, Nigeria Figure: Log Real Oil Prices and Log Real State and LGA Revenue Allocation, 1979-1999 Belinda Archibong (Barnard College) Bargaining Matters: Taxation and Public Service Provision Under Natural Resource ReveOctober 21, 2018 9 / 1
  15. 15. Conceptual Framework A Simple Framework of Revenue Sharing in Natural Resource Rich Settings P-A labor literature; other- Acemoglu and Robinson (2001). 2 agents- fed, subnational agent (e.g. citizen union). Obj. f-n of P (autocrat)- min disorder, coups, max payoff from rev. ext. Need effort from agent- comply with P, engage in act that promote P obj., actions not disruptive to rev. ext. Assume- agents can’t be perf. monitored, P motivates A by sharing cent. collected rev. Suppose there are n agents “working for” the principal, and ei refers to agent i s effort, with i = 1, ...., n. The cost of effort to agent i is c(ei ) which we assume to be increasing and convex with c(0) = 0. Under a revenue sharing scheme, agent i s allocation is composed of a share θi of the federally collected natural resource revenues. θi is defined such that for (θ1, θ2, ..., θn), θi ≥ 0 for all i and i θi ≤ 1. max θi (1 − θi )R(e1, ..., en, δ) (1) where R(.) is increasing and concave and δ is a stochastic component of natural resource revenues. The corresponding agent i s function is: max ei (θi )R(e1, ..., en) − c(ei ) (2) and agent i chooses effort, e∗ i , so that d dei (θi R(e1, ..., en) − c(ei )) = 0; θi R (e∗ i ) = c (e∗ i ) (3) and θi = c (e∗ i ) R (e∗ i ) (4) Belinda Archibong (Barnard College) Bargaining Matters: Taxation and Public Service Provision Under Natural Resource ReveOctober 21, 2018 10 / 1
  16. 16. Conceptual Framework A Simple Framework of Revenue Sharing in Natural Resource Rich Settings θi = c (e∗ i ) R (e∗ i ) (5) Mechanical- inc. in MC of A’s effort in compliance, rel to MR, inc share of rev to agent. P must share greater share of rev. to induce agent compliance when compliance marginally more costly for agent. Costs of compliance higher for A with greater ability to mobilize for direct access to nat. resource rev. or less dependent on center for rev., esp in context of falling oil prices and ass. rev from oil. This ability to mobilize = bargaining power here. Agents with higher bargaining power have higher opportunity costs, for instance in the form of foregone income from more direct control of natural resources, of compliance with the principal Principal’s relative costs of disagreement with the agent, in the form of costs to revenue extraction, are higher in resource producing regions. Rel. punishment (e.g. reduced share) higher. Provide measures of bargaining power- riots and petrol, using evidence from Nigerian history Belinda Archibong (Barnard College) Bargaining Matters: Taxation and Public Service Provision Under Natural Resource ReveOctober 21, 2018 11 / 1
  17. 17. Data and Empirical Specification Dependent Variables: Data on Subnational Tax Revenue Allocation and Expenditure and Public Service Provision Data from Nigeria AAS. Construct new dataset of rev. alloc to states and LGA ad recurrent and capital expenditure over military rule, 1979 to 1996 available data. Complete subnational data from 1988-1996. Public service provision- avg. nos of public primary schools (PPS), health facilities per 105 pop over period. Test persistence- use primary survey data from OSSAP and Columbia in 2012 on functionality of grid at PPS. Also night light density in 2012 Belinda Archibong (Barnard College) Bargaining Matters: Taxation and Public Service Provision Under Natural Resource ReveOctober 21, 2018 12 / 1
  18. 18. Data and Empirical Specification Data on Tax Revenues, Expenditures, Public Service Provision Belinda Archibong (Barnard College) Bargaining Matters: Taxation and Public Service Provision Under Natural Resource ReveOctober 21, 2018 13 / 1
  19. 19. Data and Empirical Specification Summary Statistics: State and LGA Revenue Allocation and Public Service Provision Long-run Averages, 1979-1996 Abia Adamawa Akwa Ibom Anambra Bauchi Bayelsa Benue Borno Cross RiverDelta Ebonyi Edo Ekiti Enugu FCT Gombe Imo Jigawa Kaduna Kano Katsina Kebbi Kogi Kwara Lagos Nasarawa Niger OgunOndo Osun Oyo Plateau Rivers Sokoto Taraba YobeZamfara 4 6 8 10 12 14 5 10 15 Longitude Latitude 10000 20000 30000 real_stallo State allocation, mn 2010 Naira, 1979−1996 Abia Adamawa Akwa Ibom Anambra Bauchi Bayelsa Benue Borno Cross RiverDelta Ebonyi Edo Ekiti Enugu FCT Gombe Imo Jigawa Kaduna Kano Katsina Kebbi Kogi Kwara Lagos Nasarawa Niger OgunOndo Osun Oyo Plateau Rivers Sokoto Taraba YobeZamfara 4 6 8 10 12 14 5 10 15 Longitude Latitude 5000 10000 15000 20000 real_lgallo LGA allocation, mn 2010 Naira, 1979−1996 Abia Adamawa Akwa Ibom Anambra Bauchi Bayelsa Benue Borno Cross RiverDelta Ebonyi Edo Ekiti Enugu FCT Gombe Imo Jigawa Kaduna Kano Katsina Kebbi Kogi Kwara Lagos Nasarawa Niger Ogun Ondo Osun Oyo Plateau Rivers Sokoto Taraba YobeZamfara 4 6 8 10 12 14 5 10 15 Longitude Latitude 50 100 sch_1000 Public Primary Schools (per 10^5 pop.), 1979−1996 Abia Adamawa Akwa Ibom Anambra Bauchi Bayelsa Benue Borno Cross RiverDelta Ebonyi Edo Ekiti Enugu FCT Gombe Imo Jigawa Kaduna Kano Katsina Kebbi Kogi Kwara Lagos Nasarawa Niger Ogun Ondo Osun Oyo Plateau Rivers Sokoto Taraba YobeZamfara 4 6 8 10 12 14 5 10 15 Longitude Latitude 10 20 30 40 50 hea_1000 Health/Hospitals (per 10^5 pop.), 1979−1996 Figure: Revenue Allocation and Public Service Provision Belinda Archibong (Barnard College) Bargaining Matters: Taxation and Public Service Provision Under Natural Resource ReveOctober 21, 2018 14 / 1
  20. 20. Data and Empirical Specification State and LGA Revenue Allocation and Current Public Service Provision, 1979-1996 Abia Adamawa Akwa Ibom Anambra Bauchi Bayelsa Benue Borno Cross RiverDelta Ebonyi Edo Ekiti Enugu FCT Gombe Imo Jigawa Kaduna Kano Katsina Kebbi Kogi Kwara Lagos Nasarawa Niger OgunOndo Osun Oyo Plateau Rivers Sokoto Taraba YobeZamfara 4 6 8 10 12 14 5 10 15 Longitude Latitude 10000 20000 30000 real_stallo State allocation, mn 2010 Naira, 1979−1996 Abia Adamawa Akwa Ibom Anambra Bauchi Bayelsa Benue Borno Cross RiverDelta Ebonyi Edo Ekiti Enugu FCT Gombe Imo Jigawa Kaduna Kano Katsina Kebbi Kogi Kwara Lagos Nasarawa Niger OgunOndo Osun Oyo Plateau Rivers Sokoto Taraba YobeZamfara 4 6 8 10 12 14 5 10 15 Longitude Latitude 5000 10000 15000 20000 real_lgallo LGA allocation, mn 2010 Naira, 1979−1996 Abia Adamawa Akwa Ibom Anambra Bauchi Bayelsa Benue Borno Cross RiverDelta Ebonyi Edo Ekiti Enugu FCT Gombe Imo Jigawa Kaduna Kano Katsina Kebbi Kogi Kwara Lagos Nasarawa Niger Ogun Ondo Osun Oyo Plateau Rivers Sokoto Taraba YobeZamfara 4 6 8 10 12 14 5 10 15 Longitude Latitude 0.0 0.1 0.2 0.3 0.4 0.5 pr_grid1 % PP Schools w/ Func. Electricity, 2011−2012 Abia Adamawa Akwa Ibom Anambra Bauchi Bayelsa Benue Borno Cross RiverDelta Ebonyi Edo Ekiti Enugu FCT Gombe Imo Jigawa Kaduna Kano Katsina Kebbi Kogi Kwara Lagos Nasarawa Niger Ogun Ondo Osun Oyo Plateau Rivers Sokoto Taraba YobeZamfara 4 6 8 10 12 14 5 10 15 Longitude Latitude 2 3 lnlight Log Night Light Density, 2012 Figure: Revenue Allocation and Public Service Provision Belinda Archibong (Barnard College) Bargaining Matters: Taxation and Public Service Provision Under Natural Resource ReveOctober 21, 2018 15 / 1
  21. 21. Data and Empirical Specification Data on Subnational Bargaining Power Use Nigerian history, social science lit and conceptual framework as guide- which variables affect ability of subnational agents to mobilize for access to rev and ass expend. or bargaining power Should raise MC of A effort in compliance- riots and petroleum Petrol- explicit in Fed. acct. Organized protests- riots- citizen bargaining power (esp in authoritarian regimes). Students, unions in 1980s and 1990s (Bratton and Van de Walle, 1992; Daddieh, 1996; Federici and Caffentzis, 2000; Osaghae, 1995; Shettima, 1993; Wiseman, 1986). Use GDELT data on conflict events. Log total riots in a given year. Greater capacity for collective action, higher bargaining power, attract more state rev. alloc and expenditure Belinda Archibong (Barnard College) Bargaining Matters: Taxation and Public Service Provision Under Natural Resource ReveOctober 21, 2018 16 / 1
  22. 22. Data and Empirical Specification Summary Statistics: Petroleum Production, Riots, Population (1990) Abia Adamawa Akwa Ibom Anambra Bauchi Bayelsa Benue Borno Cross RiverDelta Ebonyi Edo Ekiti Enugu FCT Gombe Imo Jigawa Kaduna Kano Katsina Kebbi Kogi Kwara Lagos Nasarawa Niger Ogun Ondo Osun Oyo Plateau Rivers Sokoto Taraba YobeZamfara 4 6 8 10 12 14 5 10 15 Longitude Latitude 0.00 0.25 0.50 0.75 1.00 pet_prod Petrol Production Abia Adamawa Akwa Ibom Anambra Bauchi Bayelsa Benue Borno Cross RiverDelta Ebonyi Edo Ekiti Enugu FCT Gombe Imo Jigawa Kaduna Kano Katsina Kebbi Kogi Kwara Lagos Nasarawa Niger Ogun Ondo Osun Oyo Plateau Rivers Sokoto Taraba YobeZamfara 4 6 8 10 12 14 5 10 15 Longitude Latitude −0.4 −0.2 0.0 0.2 zriots Z−Score Riots, 1979−1999 Abia Adamawa Akwa Ibom Anambra Bauchi Bayelsa Benue Borno Cross RiverDelta Ebonyi Edo Ekiti Enugu FCT Gombe Imo Jigawa Kaduna Kano Katsina Kebbi Kogi Kwara Lagos Nasarawa Niger Ogun Ondo Osun Oyo Plateau Rivers Sokoto Taraba YobeZamfara 4 6 8 10 12 14 5 10 15 Longitude Latitude 0.0 0.2 0.4 0.6 frac Ethnic Fractionalization Abia Adamawa Akwa Ibom Anambra Bauchi Bayelsa Benue Borno Cross RiverDelta Ebonyi Edo Ekiti Enugu FCT Gombe Imo Jigawa Kaduna Kano Katsina Kebbi Kogi Kwara Lagos Nasarawa Niger Ogun Ondo Osun Oyo Plateau Rivers Sokoto Taraba YobeZamfara 4 6 8 10 12 14 5 10 15 Longitude Latitude 1e+06 2e+06 3e+06 4e+06 5e+06 pop90 Population, 1990 Figure: Petroleum Production, Riots, Ethnic Fractionalization and Population (1990) Belinda Archibong (Barnard College) Bargaining Matters: Taxation and Public Service Provision Under Natural Resource ReveOctober 21, 2018 17 / 1
  23. 23. Data and Empirical Specification Data and Empirical Specification Estimating Equations OLS and FE approach Rit = β0 + β1Riotsit + β2Petrolit + β12Riotsit ∗ Petrolit + Xitγ + σe + δt + it (6) Yi = β0 + β1Ri + Xi γ + σe + i (7) Endogeneity of riots. Correlations. Future work instrumenting with food prices/rainfall. Belinda Archibong (Barnard College) Bargaining Matters: Taxation and Public Service Provision Under Natural Resource ReveOctober 21, 2018 18 / 1
  24. 24. Data and Empirical Specification Results Reduced form estimates of relationship between riots, petrol and state revenue allocation and expenditure, 1979-1996 State Alloc. Capex Rec.Ex (1) (2) (3) (4) (5) (6) Log Population 0.172∗∗∗ 0.176∗∗∗ −0.425 −0.428 0.650∗∗∗ 0.645∗∗∗ (0.060) (0.049) (0.346) (0.334) (0.221) (0.206) Log Riots 0.015∗ 0.026∗∗ 0.079∗∗ 0.089∗ 0.039∗ 0.052∗ (0.009) (0.010) (0.038) (0.047) (0.024) (0.029) Petrol 0.179∗∗ 0.136 0.127 0.096 0.152 0.111 (0.086) (0.089) (0.182) (0.201) (0.131) (0.117) Log Riots x Petrol −0.042∗ −0.036 −0.047 (0.024) (0.053) (0.030) Fractionalization −0.334∗∗∗ −0.311∗∗∗ 0.248 0.259 0.250 0.264 (0.083) (0.088) (0.385) (0.380) (0.163) (0.162) President 0.072 0.046 −0.246 −0.259 −0.348 −0.364 (0.156) (0.151) (0.298) (0.301) (0.226) (0.227) Constant 9.361∗∗∗ 9.309∗∗∗ 16.696∗∗∗ 16.697∗∗∗ 2.169 2.171 (0.874) (0.733) (5.589) (5.364) (3.541) (3.255) Geographic controls Yes Yes Yes Yes Yes Yes Zonal FE Yes Yes Yes Yes Yes Yes Year FE Yes Yes Yes Yes Yes Yes N 274 274 190 190 190 190 R2 0.786 0.792 0.475 0.477 0.714 0.718 Notes: Panel regressions estimated by OLS. Robust standard errors in parentheses clustered by state. Dependent variables are log real State allocations (State Alloc.), capital (Capex) or recurrent (Rec.Ex) expenditure over 1988-1996 years of available data. Covariates as described in text. Geographic controls include distance to capital and land suitability for agriculture. ∗∗∗Significant at the 1 percent level, ∗∗Significant at the 5 percent level, ∗Significant at the 10 percentBelinda Archibong (Barnard College) Bargaining Matters: Taxation and Public Service Provision Under Natural Resource ReveOctober 21, 2018 19 / 1
  25. 25. Data and Empirical Specification Results Reduced form estimates of relationship between riots, petrol and LGA revenue allocation and expenditure, 1979-1996 LGA Alloc. Capex Rec.Ex (1) (2) (3) (4) (5) (6) Log Population 0.202∗∗∗ 0.205∗∗∗ 0.312∗ 0.318∗∗ 0.876∗∗∗ 0.877∗∗∗ (0.047) (0.048) (0.175) (0.161) (0.080) (0.076) Log Riots 0.003 0.009 0.007 0.024 −0.001 0.004 (0.007) (0.009) (0.021) (0.024) (0.010) (0.013) Petrol 0.191∗∗∗ 0.165∗∗ 0.040 0.025 0.254∗∗∗ 0.250∗∗∗ (0.064) (0.064) (0.226) (0.202) (0.060) (0.060) Log Riots x Petrol −0.021 −0.067∗ −0.018 (0.016) (0.037) (0.017) Fractionalization −0.156 −0.135 0.030 0.079 −0.304∗∗∗ −0.291∗∗∗ (0.119) (0.122) (0.333) (0.335) (0.102) (0.101) President −0.112∗ −0.126∗∗ −0.070 −0.078 −0.399∗∗∗ −0.401∗∗∗ (0.060) (0.059) (0.292) (0.311) (0.073) (0.074) Constant 7.279∗∗∗ 7.238∗∗∗ 5.365∗ 5.117∗∗ −1.941 −2.008∗ (0.629) (0.658) (2.778) (2.521) (1.226) (1.153) Geographic controls Yes Yes Yes Yes Yes Yes Zonal FE Yes Yes Yes Yes Yes Yes Year FE Yes Yes Yes Yes Yes Yes N 285 285 129 129 129 129 R2 0.814 0.815 0.565 0.573 0.865 0.866 Notes: Panel regressions estimated by OLS. Robust standard errors in parentheses clustered by state. Dependent variables are log real LGA allocations (LGA Alloc.), capital (Capex) or recurrent (Rec.Ex) expenditure over 1988-1996 years of available data. Covariates as described in text. Geographic controls include distance to capital and land suitability for agriculture. ∗∗∗Significant at the 1 percent level, ∗∗Significant at the 5 percent level, ∗Significant at the 10 percentBelinda Archibong (Barnard College) Bargaining Matters: Taxation and Public Service Provision Under Natural Resource ReveOctober 21, 2018 20 / 1
  26. 26. Data and Empirical Specification Results Reduced form estimates of relationship between state and LGA revenue allocation and expenditure and public service provision LGA Alloc. LGA Capex LGA Rec.Ex State Alloc. State Capex State Rec.Ex (1) (2) (3) (4) (5) (6) Grid −0.010 −0.015 0.008 −0.006 0.008 0.007 (0.023) (0.018) (0.021) (0.017) (0.008) (0.009) Adjusted R2 0.652 0.658 0.651 0.651 0.657 0.655 Log Night Light Dens. 0.249∗∗∗ −0.078 0.139 0.204∗∗∗ −0.035 0.053 (0.083) (0.096) (0.106) (0.057) (0.040) (0.035) Adjusted R2 0.748 0.710 0.715 0.757 0.706 0.712 Log Nos. School/1000 0.178 −0.038 −0.171 0.038 −0.093∗∗∗ −0.160∗∗∗ (0.181) (0.076) (0.121) (0.096) (0.032) (0.031) Adjusted R2 0.563 0.555 0.583 0.554 0.610 0.671 Log Nos. Health/1000 −0.289 0.069 −0.186 −0.248∗∗ −0.030 −0.131∗∗∗ (0.222) (0.109) (0.161) (0.097) (0.041) (0.042) Adjusted R2 0.517 0.502 0.524 0.538 0.500 0.561 Population Density Yes Yes Yes Yes Yes Yes Geographic controls Yes Yes Yes Yes Yes Yes Zonal FE Yes Yes Yes Yes Yes Yes Notes: Regressions estimated by OLS. Robust standard errors in parentheses. Dependent variables are in column: Grid is proportion of public primary schools with functional grid based electricity in 2012. Log Night Light Dens. is log night light density in 2012. Log Nos. School/1000 is average log number of public primary schools per 100,000 population over 1979-1996 years of available data. Log Nos. Health/1000 is average log number of public health facilities per 100,000 population over 1979-1996 years of available data. Covariates are log real LGA or state allocations (LGA Alloc. or State Alloc.), capital (Capex) or recurrent (Rec.Ex) expenditure averages over 1979-1996 for years of available data. Geographic controls include a petroleum production indicator, log atlantic slave trade exports, distance to capital, land suitability for agriculture and mean elevation.GDP per capita in 2010 is included as a control for the Grid and Log ∗∗∗ ∗∗ Belinda Archibong (Barnard College) Bargaining Matters: Taxation and Public Service Provision Under Natural Resource ReveOctober 21, 2018 21 / 1
  27. 27. Conclusion Conclusion and Further Work 1 Subnational agents with greater bargaining power, able to engage in collective action and mobilize to demand access for rev from center under nat. res. rev sharing arrangements, get rel. larger share of resources under arrangements, even in context of authoritarian regimes 2 Riots positively associated with state revenue allocation and expenditure, not LGA- democratic process as signaling? Disaggregating riots by actors, IV for riots 3 But riots and petrol interaction is negative- redistribution away from petrol areas? Heavier monitoring/punishment in petrol areas? 4 Unclear whether more revenue allocation and assoc. expenditure translates to more subnational public service provision 5 Inc. proliferation of rev sharing arrangements in nat. resource countries-understand how governments use revenues to smooth political processes 6 Links between perceived govt quality and ability of subnational agents to mobilize for access to tax res, results have implications for agents’ attitudes towards tax compliance and evasion/avoidance behavior 7 Future work on tax compliance and subnational rev allocation under nat. res. rev. sharing arrangements. And more formal modeling of bargaining role. Belinda Archibong (Barnard College) Bargaining Matters: Taxation and Public Service Provision Under Natural Resource ReveOctober 21, 2018 22 / 1
  28. 28. Appendix Correlates of State and LGA Capital and Recurrent Expenditure, 1979-1996 State Capex State Rec.Ex LGA Capex LGA Rec.Ex (1) (2) (3) (4) State Alloc. 0.628∗ 0.774∗∗∗ (0.357) (0.254) LGA Alloc. 0.641∗∗∗ 0.683∗∗∗ (0.246) (0.105) Constant 2.990 1.706 1.369 2.147∗∗ (3.552) (2.469) (2.338) (0.979) Zonal FE Yes Yes Yes Yes N 37 37 37 37 Adjusted R2 -0.079 0.058 0.071 0.194 Notes: Regressions estimated by OLS. Robust standard errors in parentheses. Dependent variables are log real state and LGA capital (Capex) or recurrent (Rec.Ex) expenditure averages over 1979-1996 for years of available data. Covariates are log real state and LGA revenue allocations averages over the same period. ∗∗∗Significant at the 1 percent level, ∗∗Significant at the 5 percent level, ∗Significant at the 10 percent level. Belinda Archibong (Barnard College) Bargaining Matters: Taxation and Public Service Provision Under Natural Resource ReveOctober 21, 2018 23 / 1

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