Association for Public Policy Analysis & Management

This research is designed to study the relationship between the Extractive Industries Transparency Initiative (EITI) and poverty reduction in resource-rich developing economies. The EITI aims to provide higher transparency and better accountability of revenue streams from extractive industries in resource-rich economies. Currently, there are 52 country members that are required to satisfy and meet the EITI Standard requirements. The EITI is guided by twelve core principles and Principle #1 targets to decrease poverty and provide sustainable development. The theoretical literature on the EITI suggests that the EITI has no significant impact on institutional quality but has a substantial effect on economic development in terms of growth and investment climate. However, it is important to notice that there is no evidence of whether the EITI has any influence on poverty. Consequently, this paper purposes to identify the importance of the EITI for enhancement of poverty in the EITI member states. The empirical analysis of 62 resource-rich developing economies which are either EITI members (34 countries) and non-EITI members (28 countries) over 30 years shows that committing to the EITI brings a negative and significant impact on poverty reduction. The additional robustness check provides similar results which imply that the EITI does not provide a considerable improvement in countries where poverty takes place. Thus, it can be concluded that the EITI is associated with an increase in the poverty gap which means that following EITI regulations do not lead to positive outcomes in social welfare.

Keywords: accountability, policies, poverty, sustainable development, transparency.