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The Effects of Oil and Mineral Taxation on Non-commodity Fiscal Revenues

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  • Perry, Guillermo
  • Bustos, Sebastián

Abstract

This paper shows, first, that non-commodity revenues are more volatile in oil- and mineral-rich countries and that quality of institutions is associated with lower volatility. We investigate the channels through which oil and mineral revenue volatility lead to non-commodity revenues volatility, and find that when oil and fiscal revenues increase (decrease), non-commodity revenues are reduced (increased) discretionally, and that this substitution effect is larger and faster than an indirect positive income effect through increased public expenditures and GDP. Latin American oil- and mineral-rich countries appear, though, to behave differently. In particular, most of them show increased non-commodity revenues pari passu with increased oil and mineral revenues during the last decade. These findings have consequences for the overall volatility of public expenditures and the effectiveness of automatic tax stabilizers in oil- and mineral-rich countries.

Suggested Citation

  • Perry, Guillermo & Bustos, Sebastián, 2012. "The Effects of Oil and Mineral Taxation on Non-commodity Fiscal Revenues," IDB Publications (Working Papers) 4062, Inter-American Development Bank.
    • Handle: RePEc:idb:brikps:4062
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Natural resources; Windfall public revenues; Natural resource curse; Optimal fiscal policy;
    All these keywords.

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)

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