Breaking the resource curse: Transparency in the natural resource sector and the extractive industries transparency initiative

This article critically examines the impact, up until 2009, of the Extractive Industries Transparency Initiative (EITI). The EITI is an international policy intervention that aims to mitigate the negative effects of resource abundance by promoting the transparency of resource revenues and accountability of the governments of resource rich states. Its effectiveness can be assessed by examining two outcomes that are suggested to be negatively affected by resource abundance: economic development and quality of governance. Through a panel study, including approximately 200 countries, the influence of the EITI in these two areas is examined. Results suggest that the negative effect of resource abundance on GDP per capita, the capacity of the government to formulate and implement sound policies and the level of rule of law is mitigated in EITI countries. However, the EITI has little effect on level of democracy, political stability and corruption. The study concludes that there are some early indications that the EITI has been successful in protecting some nations from selected elements of the resource curse. This is encouraging given the relatively short time period since the founding of the EITI, however the mixed results suggest that a similar study should be repeated in 5 to 10 years when EITI policies have had enough time to fully take effect.