Do international transparency initiatives substitute for domestic governance?

Abstract

International institutions affect domestic governance, but their substantial effects primarily depend on member countries’ genuine willingness to comply. This paper explores whether international institutions complement or substitute for domestic institutions. The Extractive Industries Transparency Initiative (EITI) was created for the purpose of complementing domestic institutions in resource-abundant countries that show low levels of transparency. The essential mechanism of the EITI is to provide the public with the information on resource revenues. By enhancing the flow of information on resources, the EITI is expected to improve domestic transparency governance on resource industries. This transparency of information can promote accountability and reduce corruption in resource-rich countries. In contrast, international institutions can substitute domestic institutions in a negative way, leading to reductions in domestic governance quality. By using the instrumental variable estimation to address a selection bias and the survival model to estimate the effect of the EITI membership on domestic transparency governance, this paper finds that the EITI membership has a positive effect on domestic transparency, but there is little spillover effect on institutional reformation.