Multiple streams framework and mineral royalties: The 2005 mining tax reform in Chile

Abstract

In economic theories, institutional change usually occurs in response to changes in relative prices. Mineral policies in mining countries frequently follow this behavior, modifying their tax systems as metal prices change. Nonetheless, Chile presents a deviation from common behavior with a mining tax reform that took place before a major increase in mineral commodity prices and when market analysts and political leaders expected prices to remain relatively constant. Using the Multiple Streams Framework, we find that the policy community combined with anticipated elections explains the initial failure of mining tax reforms in 2004 and then successful reform in 2005. We do not find that the national mood (part of the problem stream) played a key role in the reforms; it remained unchanged during this period, and even now, and thus cannot account for change. Furthermore, we develop and find support for two hypotheses on institutional maturity and issue complexity: when states have mature democratic institutions and the policy is complex, we expect policy entrepreneurs and the policy stream to have a greater impact than in states with weak institutions and less complex issues. We thus contribute by solving an empirical puzzle on mining policy and by proposing new hypotheses to investigate with the Multiple Streams Framework.