Transparency in Oil-rich Countries and the Importance of Democracy Table 1: Regression Results Dependent Variable
Independent Variables Democracy 1990s
Transparency 1990s Constant
Region dummies R-squared N
Democracy 2000s 0.807*** (0.06) -0.018 (0.01)
2.267*** (0.75) Yes
0.793 157
Transparency 2000s -5.064*** (0.28)
0.740*** (0.06)
69.919*** (3.46) Yes
0.885 157
White standard errors in parentheses. ***Significance at the 1% level; **Significance at the 5% level; *Significance at the 10% level.
and less development behaviour. Both types can be denoted impartiality- enhancing institutions, i.e. institutions that reduce the possibility or attraction of favouritism in contrast to acting in the general public interest.6
To effectively address the resource curse these are the types of institutions that should be improved through policy interventions.
argue that transparency is not a sufficient condition for accountability. If citizens are not able to act on the information provided, transparency does not increase real accountability and cannot be expected to lift the resource curse. This is also an issue of the type of information provided. The EITI focus on transparency in revenues, for instance, appears misplaced since the key problem of patronage is about expenditure. Using cross-country data, Kolstad and Wiig show that transparency does not affect the extent to which resource-rich countries experience reduced economic growth. The study concludes that, on its own, the EITI initiative is unable to improve governance and reduce corruption. It needs to be complemented by other initiatives (see also Hilson and Maconachie’s discussion on this topic8
).
There are few empirical studies of the effect of transparency on democratic accountability. A number of studies look at the reverse relationship; at democracy as one of the determinants of transparency. A theoretical account of how a government is interested in controlling information is provided by Besley and Prat.9
Pitlik et al.10
cross-country analysis of factors that determine transparency using EITI membership as their dependent variable. They find that democracies are more likely to be EITI members using the World Bank voice and accountability indicator and the Freedom House political freedom index as proxies for democracy. Petrova11
perform a similarly finds that democracies exhibit
greater transparency using the Polity IV democracy index and the Freedom House press freedom index, which are the same indices used in the next section of this article. Petrova also finds that the impact of democracy on transparency is lowest in countries with high inequality, arguing that in unequal countries the rich influence the preferences of ordinary people by means other than media capture.
In the only study looking at the direction of causality, Williams12 finds
that in the short term transparency increases democracy, but in the long-term the causal effect is from democracy to transparency. He argues that “the ability of governments to release information may not be due to capacity constraints on their part, but through political constraints placed on their actions”. The proxy used for democratic
12
These tests started by looking at whether transparency improves democracy. Regressions were run using average scores on democracy for the 2000s as the dependent variable. The effect of transparency on democracy was tested by including the average score on press freedom in the 1990s as an explanatory variable. Due to the correlation between democracy and press freedom in the 1990s, this transparency measure has been orthogonalised, which is a standard approach in dealing with multicollinearity. Since institutions (including democracy) are path-dependent, average democracy scores in the 1990s were also included as a control variable. Finally, dummies for the world’s regions were included as a simple way of capturing other differences that may affect democracy. If transparency has a robust effect on democracy, these regressions should turn out a statistically significant coefficient for the transparency variable. As the results in the first column of Table 1 show, however, that transparency is not significant. In other words, after controlling for the stickiness of democratic institutions and regional differences, transparency does not have an effect on democracy. In the second column of Table 1 a similar regression has been performed to test the opposite effect of democracy on transparency. Here, democracy in the 1990s was used as an explanatory variable for press freedom in the 2000s, controlling for press freedom in the 1990s and regional differences. The effect of democracy on transparency is statistically significant. Since lower values of the transparency index indicate greater transparency, the negative
EXPLORATION & PRODUCTION – VOLUME 8 ISSUE 2
Since transparency initiatives are primarily directed at problems of democratic accountability, this is the form of institution focused on in the following. In a review of transparency and the resource curse, Kolstad and Wiig7
accountability in Willimas’ study is the presence of executive constraints, which is quite a narrow measure of democracy. Transparency is measured by the quantity of socioeconomic data a country reports to the World Bank and the International Monetary Fund, which is more of a measure of external transparency. Consistent with finding no lasting effect of transparency on democratic accountability, Williams finds no significant effect of transparency on corruption level, which is contrary to the results found by Brunetti and Weder.13
In summary, existing evidence for an effect of transparency on democratic accountability is minimal, whereas there seems to be more evidence that democracy increases the availability of information. In order to go beyond existing studies, some preliminary evidence is presented on the relationship between transparency and democratic accountability in the next section.
Does Transparency Increase Democratic Accountability? Two different positions on the relationship between transparency and democratic accountability can be formulated. One position holds that transparency puts the citizens of a country in a position to demand greater influence in the country’s political affairs. In short, transparency increases democratic accountability. The other position takes the opposite view, stating that giving people a greater say through increased democratic accountability will make them demand greater transparency. In other words, democratic accountability increases transparency. These two positions need not be mutually exclusive: in principle, it is possible that transparency and democratic accountability are mutually reinforcing. It is possible to test these two positions or hypotheses on the direction of the relationship between transparency and democratic accountability. Using cross-country data on democracy from the Polity IV data set and on press freedom (a common proxy for transparency13
) from Freedom House, some simple tests of this kind have been performed.
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