A Cure for the Curse? Effects of the Extractive Industries Transparency Initiative

The Extractive Industries Transparency Initiative (EITI) was created in the early 2000s as a response to the growing concern of the natural resource curse. By using EITI s own documents and related theory, I propose a framework for analysis utilising Fixed Effects regression models to determine what effects are associated with EITI membership and implementation. These effects are divided into three groups; economic, institutional, and effects on investment and the investment climate. The analysis distinguishes between separate stages of EITI membership, and includes an alternative specification using indicators for EITI activities or implementation. The results show no significant effect of membership on economic performance, differing from previous findings of a negative correlation. Combined with evidence of reduced dependency on foreign aid, we may see a convergence of EITI countries towards the economic levels seen in other countries. Most institutional dimensions are not affected by EITI membership, but there is some evidence of greater public participation and accountability, and better regulatory quality of government policies. The paper does find that EITI implementation affects political stability, as EITI reports are associated with greater political tension and Multi-Stakeholder Groups (MSGs) work as a mitigating factor. This indicates that the EITI works as it should; reports present challenges and problems within the extractive sector, while MSGs work as a platform for debate. The most direct effects of EITI are within investments and the investment climate. EITI membership is associated with one investment grade increase in credit ratings of sovereign bonds. In addition, the paper finds strong evidence for increases in foreign direct investments as a share of GDP, and increases in domestic investments in EITI countries. These results are robust to a number of economic, political and development control variables. The findings illustrate that membership stages do matter; EITI compliant countries are associated with more significant results than EITI candidates. In addition, it seems that membership status is associated with stronger effects than specific EITI activities, except in terms of political stability.