Lund Papers in Economic History,
Lund University, Department of Economic History

Abstract: The resource curse literature has established that the taxation of natural resources might limit the long-term development of fiscal capacity in resource-rich countries. This article explores if, and how, natural resource abundance generates fiscal dependence on natural resource revenues. We compare five peripheral economies of Latin America (Bolivia, Chile, Peru) and Scandinavia (Norway, Sweden) over a period of 90 years, between 1850 and 1939. Both groups were natural resource abundant, but in the latter natural resource dependence decreased over time. By using a novel database, we find that fiscal dependence was low in Norway and Sweden, while high and unstable in Bolivia, Chile and Peru. This suggests that natural resource abundance should not be mechanically linked to fiscal dependence. An accounting identity shows that sudden increases in fiscal dependence were related to both economic and political factors: countries’ economic diversification, and attitudes of the relevant political forces about how taxation affects the companies operating in the natural resource sector.

Keywords: resourcecurse; taxation; Latin America; Scandinavia; rentier state; fiscal contract

JEL-codes: H20; N40; N50; O13; Q32

44 pages, November 16, 2020

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