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JAS0010.1177/0021909617709485Journal of Asian and African StudiesSulemana

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The Effect of Trust and Corruption on Public Preferences for Cash Transfers from Oil Revenues in Ghana

Journal of Asian and African Studies 1–18 © The Author(s) 2017 Reprints and permissions: sagepub.co.uk/journalsPermissions.nav https://doi.org/10.1177/0021909617709485 DOI: 10.1177/0021909617709485 journals.sagepub.com/home/jas

Iddisah Sulemana

GIMPA Business School, Ghana Institute of Management and Public Administration, Ghana

Abstract Ghana discovered oil in 2007 and began to produce and export it in commercial quantities in 2011. Following its oil discovery, scholars and experts feared Ghana might fall into the trap of the ‘natural resource curse’, the observed tendency for nations endowed with and heavily dependent upon oil or mineral resources to experience slow economic growth. Accordingly, various policy options to manage the oil revenues in order to avert an oil resource curse have been proposed. This paper uses data from the 2012 Afrobarometer Surveys (Round 5) in Ghana to explore the extent to which institutional trust and perceived corruption influence public preferences for cash transfers from Ghana’s oil revenues. Results from ordered logistic regressions reveal that a unit increase in perceived public corruption increases the odds that a respondent would ask that cash transfers be made to all Ghanaians from the oil revenues by about 1.3%.

Keywords Cash transfers, citizen dividend, corruption, institutional trust, resource curse, Ghana

‘Oil riches are far from the blessing they are often assumed to be. In fact, countries often end up poor precisely because they are oil rich’. Birdsall and Subramanian (2004)

Introduction There is a substantial amount of literature examining the management of natural resources. Following the ground-breaking work of Sachs and Warner (1995), scholars, especially in economics and political science research, have observed that countries that are abundantly endowed with

Corresponding author: Iddisah Sulemana, GIMPA Business School, Ghana Institute of Management and Public Administration, P. O. Box AH 50, Achimota, Accra, 00233, Ghana. Email: [email protected]

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Journal of Asian and African Studies 00(0)

and heavily dependent on natural resources such as oil and minerals tend to experience rather slow economic growth (Frankel, 2010; Sachs and Warner, 1997, 2001; Sala-i-Martin and Subramanian, 2012). This phenomenon is often referred to as the ‘natural resource curse’ or the ‘resource curse’. Numerous studies have performed empirical analyses of this phenomenon (e.g. Sachs and Warner, 1997, 1999, 2001; Sala-i-Martin and Subramanian, 2012). In particular, some scholars have sought to examine the channels through which the resource curse casts its spell on countries (e.g. Sachs and Warner, 1997, 1999, 2001; Sala-i-Martin and Subramanian, 2012) and how it can be solved or avoided. Some studies thus focus on how proceeds from a natural resource could benefit a wider community or an entire country. Aside from investing oil revenues in public benefits such as education, health and infrastructure, one of the policy options commonly recommended is a ‘citizen dividend’ – a scheme that makes direct cash transfers to the citizens of a country.1 For instance, the State of Alaska in the USA operates a citizen dividend scheme of cash transfers (The Alaska Permanent Fund) from its petroleum revenues (Goldsmith, 2002; Gupta et al., 2014; Hjort, 2006; Palley, 2004), while Iran has made cash transfers from its oil revenues to citizens since December 2010 (Tabatabai, 2011).2 In Ghana, there is a scheme that manages mining proceeds whereby cash payments are made to citizens of areas affected by mining, mostly through the chiefs of those areas (Standing and Hilson, 2013). Ghana discovered oil in 2007, and began to produce and export it in commercial quantities in 2011. Following its discovery, scholars and experts feared Ghana might fall into the trap of the natural resource curse (e.g. Amundsen, 2012; Arthur, 2012; Cavnar, 2008), resulting in the advocacy of various policy options to manage the oil revenues in order to avert an oil resource curse (see Arthur, 2012; Moss and Young, 2009). However, it is worth mentioning that Ghana is not yet so heavily dependent on oil to expose it to suffering a possible natural resource curse. For instance, the Natural Resource Governance Institute reported that oil and gas revenues constituted only 6% of total revenues in 2011 for the Government of Ghana. Although oil revenues were projected to grow in the future, they were estimated to make up to about 10% of total government revenues by 2015 (Osei and Domfe, 2008). Nevertheless, a case can be made for cash transfers even if a country is not resource-dependent, because cash transfers can promote pro-poor growth (see e.g. Samson, 2008). The citizen dividend proposition in Ghana is consistent with the argument that citizen dividend can help eradicate poverty. Segal (2011) found that under certain assumptions, and depending on the year, poor countries that implement citizen dividend can reduce poverty by between 27% and 69%.3 The author further argues that global poverty could be cut in half as long as commodity prices remain above their 2004 levels. Other studies have recommended citizen dividend for specific countries and resources. Sala-i-Martin and Subramanian (2012) proposed distributing oil revenues directly to citizens in Nigeria, while a case has been made for an oil dividend for Iraq (e.g. Birdsall and Subramanian, 2004; Clemons, 2003; Palley, 2004; Smith, 2003). Finally, Isakova et al. (2012) noted that in order for Mongolia to avoid the resource curse, among other things, it ought to distribute revenues from its mineral resources – copper, gold and coal – to the general public. More recently, some experts have called for a citizen dividend in Ghana in the wake of its oil discovery in 2007. Moss and Young (2009) examined the experiences of other resource-rich countries and states, including Norway, Botswana, Alaska, Chad and Nigeria, and proposed policy options for Ghana to avoid the resource curse. They strongly favoured a modified Alaska-style direct cash distribution scheme whereby part of the proceeds from the oil revenues would be distributed directly to all Ghanaians as a means to quicken political and economic gains while ‘strengthening the country’s social contract’ (Moss and Young, 2009: 2).

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While there is a substantial amount of research on the resource curse and Alaska-style citizen dividends, there are no published empirical studies on the predictors of preferences for a citizen dividend from the citizens’ perspective. This paper examines whether trust in institutions and perceptions about corruption among public officials in Ghana influence people’s preferences for a citizen dividend. Using data from the 2012 Afrobarometer Surveys (Round 5) in Ghana, after controlling for a multitude of variables, it was found that while trust does not significantly influence preferences for cash transfers, respondents who think that corruption is widespread among public officials are significantly more likely to favour cash transfers.

Background literature The resource curse, citizen dividend and cash transfer schemes As noted above, the citizen dividend has been proposed as a remedy for the resource curse. For instance, Segal (2011) discussed two main reasons why a resource dividend (citizen dividend) is important. According to Segal, the first reason is that amidst the resource price increases of mid2008, ‘resource nationalism’ and ‘resource ownership’ rose in importance. This idea of resource nationalism and ownership also persists in Ghana, especially with regard to oil resources (as will be explained below). The second reason Segal cites is that the first of the Millennium Development Goals (MDGs) aimed by 2015 to reduce global poverty to half of its 1990 level. Segal suggested that the focus on resource dividend in poor countries could therefore help achieve this MDG (Segal, 2011: 475). Sala-i-Martin and Subramanian (2012) argued that natural resources, particularly oil and minerals, tend to have a negative effect on the economic growth of a country through adverse effects on the country’s institutional quality. Using Nigeria as example, they found empirical evidence to support this claim, and argued that this finding was robust. Consequently, as a cure for the resource curse in Nigeria, these authors proposed distributing rents from the oil resources directly to the Nigerian people. The authors also provided a helpful summary, from the theoretical economics literature, of the channels through which the resource curse operates. In particular, they discussed three of these channels. The first channel deals with the idea that natural resource rents lead to rentseeking which in turn leads to increased corruption, and consequently stifles economic growth. Their second channel relates to the effect of commodity price volatility on the economy; and, third, the resource curse operates through the so-called ‘Dutch disease’ in which real exchange appreciation due to positive price shocks often results in a declining tradeable sector (Sala-i-Martin and Subramanian, 2012: 575). However, some scholars have focused more on the institutional and political dimensions of the resource curse phenomenon (e.g. Amundsen, 2014; Hodler, 2006; Karl, 2007; Kolstad, 2009; Kolstad and Wiig, 2009; Mehlum et al., 2006a; 2006b; Robinson et al., 2006). For instance, Karl stated that ‘The “resource curse” is primarily a political and not an economic phenomenon’ (Karl, 2007: 256). To a large extent, these studies suggest that poor institutions cause the resource curse. Consequently, two dominant models emerged in the literature. The first of these, the rent-seeking model, advances the argument that entrepreneurs can engage in productive activities or rent-seeking (see e.g. Mehlum et al., 2006a): high institutional quality yields producer entrepreneurs, while low institutional quality leads to rent-seeking behaviours (Kolstad, 2009; Mehlum et al., 2006a). In the second model, resource discovery may lead to improved resource extraction or institutional inefficiencies (e.g. Robinson et al., 2006). Stronger and well-functioning institutions would ensure accountability of politicians and increase incomes while poorly-functioning institutions result in lower incomes.

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Moss (2011) contended that attempts by some poor countries to reduce poverty through cash transfer schemes have been reported to achieve impressive outcomes. Thus for poor countries that have become oil producers a recommended policy option is to adopt a citizen dividend scheme that will distribute oil wealth directly to its citizens (Moss, 2011). As with Alaska, which has been distributing oil rents to its residents since 1982, other countries have deliberately targeted various groups. For instance, Bolivia’s cash transfers from its gas revenues are directed at the elderly through pension payments, while Mongolia targets the youth through its child benefit programme arising from its mineral wealth (Moss, 2011). Equally, Gelb and Majerowicz (2011) asserted that because Uganda’s governance had been deteriorating amidst increasingly higher levels of corruption, the authorities could be trusted to invest its oil revenues wisely. These authors therefore proposed that oil revenues should be distributed directly to Ugandans through a cash transfer scheme. A popular strategy to reduce poverty and improve education and health especially in developing countries is arguably through conditional cash transfers (CCTs), whereby cash transfers are made to low income families conditional upon the beneficiaries behaving in some way, for example, improving school attendance or using and paying for health care (e.g. Attanasio et al., 2005; Bourguignon et al., 2003; Filmer and Schady, 2011; Gertler, 2004; Handa and Davis, 2006; Morris et al., 2004; Soares et al., 2009). For instance, Soares et al. (2009) found that CCTs reduced income inequality by about 21% in Brazil and Mexico and by 15% in Chile. Gertler (2004) showed that PROGRESA, an anti-poverty programme in Mexico, helped to improve significantly the health of children, while Filmer and Schady (2011) demonstrated that modest cash transfers improved school attendance by about 25 percentage points among children in Cambodia. Finally, a review of studies on the impact of cash transfers shows some evidence that cash transfers have reduced poverty and improved aspects such as education, nutrition and health, among others (Bastagli et al., 2016). Cash transfers (including CCTs) have the potential to address some of the problems posed by the natural resource curse. Because poverty and income equality could be a source of conflict (e.g. Miguel et al., 2004), it has been argued that cash transfers could reduce the risk of civil war (e.g. Palley, 2004) and therefore address the conflict aspect of the resource curse. Furthermore, by offering cash transfers to its citizenry, a government may be able increase their sense of citizen ownership, increase political participation, increase accountability among public officials, reduce public corruption and in general increase efficiency in the oil industry (Palley, 2004). These improvements could improve institutional quality. Given that the resource curse is an institutional or political issue (Karl, 2007) cash transfers, by improving the quality of public institutions, could avert the resource curse. In addition, there is empirical evidence to support the argument that slow economic growth and low per capita income can fuel civil war (e.g. Blattman and Miguel, 2010). Because slow economic growth and low per capita incomes are consequences of the resource curse, it could be argued that cash transfers, by reducing the risk of civil war, could address the conflict aspect of the resource curse.

Property rights of natural resources in Ghana That ‘Institutions matter’ (North, 1990) has become a common phrase in the development literature. A general consensus among economists and policymakers that emanated from the new institutional economics approach to economic development is that property rights are undoubtedly very important for economic development (Besley and Ghatak, 2010; O’Driscoll and Hoskins, 2003). In most developing countries, property rights are generally not well-defined, and often not enforced. Dasgupta (2002) noted that property rights in poor countries were frequently ineffectual due to a weak or corrupt state. Keefer and Knack (1997) speculated why poor countries don’t ‘catch up’

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with developed countries in terms of development. They found that poor countries with institutions ‘…that support stable and secure contractual and property rights are more likely to “catch up” than are countries lacking these institutions’ (Keefer and Knack, 1997: 591). There are laws, formal and informal, governing the ownership of natural resources in Ghana. Many studies have examined land rights (i.e. land tenure system) in Ghana (e.g. Aryeetey and Udry, 2010; Bakang and Garforth, 1998; Besley, 1995). Like most countries in Africa, areas of land in Ghana are communal property, with an authority such as the chief regulating who operates on a given piece of land for a given period of time (Besley, 1995: 904). According to Gelb and Majerowicz, The national patrimony of a country – including historical, cultural, and natural resource wealth – belongs almost by definition to each and every citizen. Why should oil or natural gas resources extracted from Nigerian or Iraqi or Ugandan soil automatically end up as public resources to be used – or abused – as determined by the government of the day? Why should they not be seen as private citizen property, to be used for private or public purposes as determined by normal tax and spending policy?’ (Gelb and Majerowicz, 2011: 19).

Thus, a pertinent question to ask is ‘Who owns the oil resources in Ghana?’ The legislative instrument governing the ownership of natural resources such as oil and minerals is very deeply encapsulated in the 1992 Constitution of the Republic of Ghana. Specifically, Article 257(6) of the 1992 Constitution of the Republic of Ghana states that: Every mineral in its natural state in, under or upon any land in Ghana, rivers, streams, water-courses throughout Ghana, the exclusive economic zone and any area covered by the territorial sea or continental shelf is the property of the Republic of Ghana and shall be vested in the President on behalf of, and in trust for the people of Ghana. (Republic of Ghana, 1992)

Hence, the oil resources discovered are the property of the Republic of Ghana. As a result, there is a general feeling of national ownership and citizen entitlement by the citizens with respect to the oil resources and revenues. Because the oil reserves are located off the coast of the Western Region, in 2010 the chiefs of that region demanded 10% of total oil revenues for the region (see e.g., Joy FM, 2016). This attracted a lot of backlash from the Ghanaian public and after consultations with the then President of Ghana, Professor JEA Mills, the chiefs rescinded their demand.

Institutional trust and corruption perceptions in Ghana Studies have shown that corruption exerts a negative influence on economic growth (e.g. Ehrlich and Lui, 1999; Gyimah-Brempong, 2002; Knack and Keefer, 1995; Mo, 2001), while trust has a positive effect on economic growth. Knack and Keefer (1995) demonstrated that by reducing investment, corruption hurts economic growth. Mo (2001) found that a one-unit increase in the corruption index reduced the growth rate by 0.545 percentage points. Mo (2001) suggested that political instability was the most important channel through which corruption dampens economic growth. Gyimah-Brempong (2002) explored the impact of corruption on economic growth and income distribution in Africa and found that ‘a unit increase in corruption reduces the growth rates of GDP and per capita income by between 0.75 and 0.9 percentage points and between 0.39 and 0.41 percentage points per year respectively’ (Gyimah-Brempong, 2002: 183). Equally, social capital (especially as measured by generalized and institutional trust) benefits economic growth (e.g. Beugelsdijk, 2004; Knack and Keefer, 1997; Zak and Knack, 2001). However, it seems that the

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Figure 1. A causal model showing how various factors could influence preferences for cash transfers.

majority of Ghanaians do not trust public institutions ‘a lot’ (e.g. Sulemana, 2014; Sulemana and Issifu, 2015). Corruption remains pervasive in Ghana. For instance, Transparency International’s Global Corruption Barometer 2013 report indicated that 54% of respondents in Ghana reported having paid a bribe to obtain one of eight services. According to the report, on a scale of 1–5, 1 being ‘not at all corrupt’, and 5 being ‘extremely corrupt’, public perception of widespread corruption is high: among political parties the score was 4.2, parliament 3.6, military 2.6, the judiciary 4.0, police 4.7, and public officials/civil servants 3.6 (Transparency International, 2013). Furthermore, Gallup’s report from a 2012 survey of 129 countries revealed that 89% of respondents in Ghana viewed government corruption as pervasive (Gallup, 2013).

Conceptual model and hypotheses Given that oil revenues belong to the state, coupled with the sense of entitlement to these revenues among Ghanaians, various factors could influence people’s preferences for cash transfers at different levels. Figure 1 is a simple causal model showing this. Whether or not people favour cash transfers could depend on individual factors (e.g. age, gender, educational attainment, and employment status) as well as contextual factors (e.g. ethnicity, political affiliation and size of town in which the individual lives). For instance, distributing oil revenues to the citizens would reduce

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funds that could be channeled into the provision of public goods such as schools and health services, among others (e.g. Gupta et al., 2014). People with higher educational attainment may therefore be more opposed to such cash transfers. In addition, in Ghana the majority of formal sector workers are employed by the government. Therefore, unemployed individuals may not favour cash transfers because they would rather have the government invest oil rents in employment-generating projects that could benefit them. Both individual and contextual factors can influence an individual’s level of trust in public institutions; this in turn influences whether or not they would favour cash transfers. Similarly, both individual and contextual factors can predict an individual’s perceptions about the level of corruption among public officials; this may also then influence their preference for cash transfers. Thus, aside from directly influencing the respondent’s preference for cash transfers, individual and contextual factors may also indirectly influence these preferences through the individual’s level of trust in public institutions and their perceptions about the level of corruption among public officials. Finally, corruption erodes trust in government officials (e.g. Chetwynd et al., 2003; Rothstein, 2010). Thus by influencing their perceptions about corruptions among pubic officials, individual and contextual factors may also indirectly influence people’s preferences for cash transfers through reduced trust in public institutions. For many African countries, ethnicity plays a major role in public policy formulation and implementation (Easterly and Levine, 1997; Haruna, 2003). Easterly and Levine (1997) noted that ethnic fragmentation in Africa explained such socio-economic phenomena as schooling outcomes, political instability and infrastructural development as well as foreign exchange distortions. As a contextual factor, therefore, ethnicity could directly or indirectly influence people’s preferences for cash transfers by affecting their trust in public institutions and their perceptions of corruption among public officials. If individuals cannot trust public officials to invest oil revenues wisely in education, health and social infrastructure (Gelb and Majerowicz, 2011) then they would rather have their share of the oil revenues paid directly to them as cash transfers. As such, I hypothesize that: H1: An individual who has low trust in public institutions is more likely to favour cash transfers. As noted above, public perceptions about corruption are strong in Ghana (Gallup, 2013; Transparency International, 2013). As a result, it is likely that citizens would prefer to have some of the oil revenues directly distributed to them if they think or believe that the authorities directly involved with the management of the oil revenues are corrupt. Therefore I further hypothesize that: H2. An individual who perceives widespread corruption among public officials is more likely to favour cash transfers.

Data and empirical strategy In order to examine empirically how institutional trust and perceived corruption may influence people’s preferences for cash transfers from the oil revenues in Ghana, this study uses data from the 2012 Afrobarometer Surveys. Conducted in many countries in Africa, the Afrobarometer Surveys are an independent, nonpartisan research project aimed at assessing the social, economic and political environments in Africa. The surveys are jointly sponsored by the Institute for Democracy in South Africa (IDASA), Ghana Center for Democratic Development (CDD-Ghana) and Michigan State University (MSU) in the USA. The surveys contain questions about oil revenue management in Ghana together with respondents’ demographic characteristics and other

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Table 1. Summary statistics and description of variables. Variable

Description

Cash transfers

A 5-point scale variable based on the proposal: ‘Government must distribute some of the oil revenues equally to all citizens in the form of cash transfers?’ [0 = Strongly disagree, 1 = Disagree, 2 = Neither agree nor disagree, 3 = Agree, 4 = Strongly agree] A composite measure of trust in public institutions (i.e., The President, Parliament, Electoral Commission, Ghana Revenue Authority, Elected Local Government Council, etc) A composite measure of perceived corruption among public officials (e.g., The President, Members of Parliament, Government Officials, Local Government Councilors, District Chief Executives, Tax Officials, Lawyers and Magistrates) Age of respondent (in years) 1 = female; 0 = otherwise 1 = highest level of education completed is primary, or no formal education; 0 = otherwise 1 = highest level education completed is either secondary or post-secondary (other an university degree); 0 = otherwise 1 = had some university, completed university, or had a post-graduate degree; 0 = otherwise 1 = respondent is unemployed; 0 = otherwise 1 = ethnic group is Akan; 0 = otherwise 1 = ethnic group is Ewe; 0 = otherwise 1 = ethnic group is Dagomba; 0 = otherwise 1 = ethnic group other than Akan, Ewe/Anglo, and Dagomba 1 = affiliated to the National Democratic Congress; 0 = otherwise 1 = affiliated to the New Patriotic Party; 0 = otherwise 1 = affiliated to the Convention People’s Party (CPP), People’s National Convention (PNC), Progressive People’s Party (PPP), or Democratic People’s Party (DPP), or did not indicate Party; 0 = otherwise 1 = respondent lives in an urban town; 0 otherwise

Trust in public institutions Perceived public corruption Age Female Primary or less Secondary/ post-secondary University Unemployed Akan Ewe/Anglo Dagomba Other ethnic group NDC NPP Other political party Urban

Mean

SD

Range

1.849

0.1.566

0–4

8.949

4.897

0–20

11.388

4.502

0–24

37.085 0.479 0.581

15.453 0.500 0.493

18–100 0–1 0–1

0.391

0.488

0–1

0.027

0.162

0–1

0.290 0.547 0.127 0.054 0.194

0.454 0.498 0.333 0.227 0.396

0–1 0–1 0–1 0–1 0–1

0.259

0.438

0–1

0.303 0.437

0.460 0.496

0–1 0–1

0.496

0.500

0–1

variables that are useful for the purposes of this study. A representative sample of 2,400 of the adult Ghanaian population (aged 18 and above) was drawn. With a response rate of 72.9%, face-to-face interviews were conducted in five languages, namely, English, Akan, Ga, Ewe and Dagbani. The variable descriptions and summary statistics are summarized in Table 1.

Dependent variable The dependent variable is based on the survey question which asked respondents to indicate their agreement or otherwise to the government distributing some of Ghana’s oil revenue directly to them. It was presented as follows:

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Now let’s talk about the management of revenue from the country’s recent oil find. Please tell me whether you agree or disagree with the following statement: Government must distribute some of the oil revenues equally to all citizens in the form of cash transfers.

The available responses were: ‘Strongly Disagree’, ‘Disagree’, ‘Neither Agree nor Disagree’, ‘Agree’, ‘Strongly Agree’, and ‘Don’t Know’.4 Treating the ‘Don’t know’ responses as missing observations, I created the ordered dependent variable Cash Transfers ranging from 0 to 4. The mean score for this variable was 1.849 which lies between ‘Disagree’ and ‘Neither agree nor disagree’.

Explanatory variables Because the study examines how trust in public institutions and corruption perceptions are correlated with public preferences for a citizen dividend (i.e. cash transfers), these variables constitute the explanatory variables. They were operationalized as follows. The survey asked respondents to indicate the level of their trust for each of 10 public institutions (The President; Parliament; Electoral Commission; the Tax Department; their Metropolitan, Municipal and District Assembly; the Ruling Party; the Opposition Party; the Police; the Army; and the Courts of Law). Responses were 0 (= ‘Not at all’), 1 (= ‘Just a little’), 2 (= ‘Somewhat’) and 3 (= ‘A lot’). I focused on trust in The President, Parliament, Electoral Commission, the Tax Department, Metropolitan, Municipal or District Assemblies, and the Ruling Party because these are the institutions directly involved with the management of oil revenues in Ghana.5 The partial correlations between the trust in institutions variables are all positive and significant at the 1% level and range from 0.454 to 0.699 with a Cronbach’s Alpha of 0.870 (see Table 2). A composite index (Trust in public institutions) was therefore created as a summed score ranging from 0 to 20. Higher scores on the scale represent high trust in public institutions while lower scores represent low trust in them. Similarly, for perceptions of corruption, I used the following question from the survey: How many of the following people do you think are involved in corruption, or haven’t you heard enough about them to say: The President and Officials in his Office, Members of Parliament, Government Officials, Local Government Councilors, District Chief Executives, Tax Officials, and Police, Lawyers and Magistrates?

The responses available were 0 (= ‘None’), 1 (= ‘Some of them’), 2 (= ‘Most of them’) and 3 (= ‘All of them’). The partial correlations among the perceived public corruption variables were also all positive and significant at the 1% level and ranged from 0.315 to 0.685 with a Cronbach’s Alpha of 0.882 (see Table 2). Consequently, I created a category of ‘Perceived public corruption’ for these public officers as a composite summed score ranging from 0 to 24. Finally, the correlation between the two composite variables (Trust in public institutions and Perceived public corruption) was –0.271 and significant at the 1% level. This suggests that people who had low trust in public institutions tended to have high perceptions about public corruption among the institutions.

Control variables Consistent with the conceptual model in Figure 1, I controlled for a number of variables that are either individual or contextual. The individual factors include demographic characteristics including age (18–100 with an average of 37 years), gender (47.9% female), their highest education level attained (‘primary’ or ‘no formal education’ = 58.1%; ‘secondary or post-secondary’ =

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Table 2. Correlation matrices for trust in public institutions and perceived public corruption variables. Trust in public institutions How much do you trust each of the following, or haven’t you heard enough about them to say? (Scored as 0 = ‘Not at all’, 1 = ‘Just a little’, 2 = ‘Somewhat’, 3 = ‘A lot’)

(1) The President (2) Parliament (3) Electoral Commission (4) The Tax Department (5) Metropolitan, Municipal, or District Assembly (6) The Ruling Party

(1)

(2)

(3)

(4)

(5)

1.000 0.563*** 0.478*** 0.454*** 0.501***

1.000 0.506*** 1.000 0.520*** 0.513*** 1.000 0.517*** 0.493*** 0.609*** 1.000

0.699*** 0.543*** 0.475*** 0.491*** 0.5404

(6)

1.000

Perceived public corruption How many of the following people do you think are involved in corruption, or haven’t you heard enough about them to say? (Scored as: 0 = ‘None’, 1 = ‘Some of them’, 2 = ‘Most of them’, 3 = ‘All of them’)

(1)

(1) The President and Officials in his Office (2) Members of Parliament (3) Government officials (4) Local Government Councilors (5) District Chief Executives (6) Police (7) Tax Officials (8) Judges and Magistrates

1.000

0.635*** 1.000 0.588*** 0.685*** 1.000 0.419*** 0.526*** 0.513*** 1.000

0.476*** 0.334*** 0.361*** 0.315***

(2)

0.560*** 0.417*** 0.426*** 0.406***

(3)

0.589*** 0.454*** 0.435*** 0.387***

(4)

0.586*** 0.346*** 0.438*** 0.388***

(5)

(6)

(7)

1.000 0.502*** 1.000 0.529*** 0.606*** 1.000 0.445*** 0.543*** 0.635***

(8)

1.000

Note: All correlations are positive and significant at the 1% level.

39.1%; and ‘university diploma/degree and above’ =2.7%), and whether they were unemployed (29%). The contextual factors are the respondent’s ethnicity (Akan = 54.7%, Ewe = 12.7%, Dagomba = 5.4% or other ethnic group = 19.4%), their political affiliation (National Democratic Congress (NDC) = 25.9%; New Patriotic Party (NPP) = 30.3%), ‘other political party’, comprising the Convention Peoples Party (CPP), People’s National Convention (PNC), Progressive Peoples party (PPP) and the Democratic People’s Party (DPP) or unknown party (i.e. not affiliated to any party or refused to disclose) = 43.7%;6 and whether their city of residence was urban (= 49.6%) or rural. My empirical strategy utilizes the following econometric model:

CASH i = β 0 + β1TRUSTi + β 2CORRUPTIONi + β3 X 3 …+ β k X K + ε i (1)

where CASHi is individual i’s preference for a cash transfer (i.e. citizen dividend), TRUSTi denotes institutional trust, CORRUPTIONi is perceived public corruption, the X’s are the individual and contextual factors discussed above, β’s are parameters to be estimated, and ε is the idiosyncratic

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Figure 2. Distribution of responses regarding government making cash transfers from the oil revenues to all Ghanaians.

error term. From the hypotheses above, it is expected that β1 < 0 and β2 > 0. Because the dependent variable is ordinal in nature (ranging from 0 to 4), Equation (1) is estimated using ordered logistic regression (see e.g. McKelvey and Zavoina, 1975).

Results and discussion Figure 2 presents the distribution of responses for the extent to which the individual agrees or disagrees with the government making cash transfers to all Ghanaians from the oil revenues. It was found that 51.41% of respondents strongly disagreed or disagreed to cash transfers compared to 43.88% who favoured (agreed or strongly agreed to) cash transfers. Only 5.02% of respondents neither agreed nor disagreed with the statement. These responses suggest that the majority of respondents did not favour cash transfers. However, this study also seeks to determine whether institutional trust and public corruption perceptions inform people’s preferences or otherwise for cash transfers from the oil revenues. Table 3 reports the ordered logistic regression results for the effect of institutional trust and perceived public corruption on preferences for cash transfers. Model I tests the effect of institutional trust only on cash transfers, while Model II tests the effect of perceived corruption only on cash transfers. The results show that high trust in public institutions is negatively and significantly correlated with preferences for cash transfers at the 10% level. A unit increase in institutional trust reduces the odds that the respondent would favour cash transfers by about 0.40%. In contrast, a unit increase in perceived corruption increases the odds that the respondent would favour cash transfers by about 1.3%. Model II tests the joint effects of institutional trust and perceived corruption on preference for cash transfers. Although the coefficient of institutional trust is still negative, it is no longer significant. However, perceived corruption is still positively and significantly correlated with preferences for cash transfers.

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In Model IV, the individual and contextual factors are controlled for in addition to institutional trust. Similarly, Model V tests the effect of perceived corruption on preferences for cash transfers while controlling for the individual and contextual factors. Again, institutional trust is negative but statistically insignificant, while perceived corruption is positive and statistically significant. Finally, both institutional trust and perceived corruption are included in Model VI after controlling for the individual and contextual variables. The results are consistent with the results in Models II to V; that is, although the coefficient of institutional trust is negative it is not statistically significant, while perceived corruption is positively and significantly correlated with preferences for cash transfers. Thus, there is some evidence to support the argument that if individuals cannot trust public institutions to invest oil revenues in public infrastructure that would benefit everyone or the majority of the people, then the public would rather have their share of the revenues directly distributed to them in the form of cash transfers (Gelb and Majerowicz, 2011).7 As Goldsmith (2010) noted, if the idea behind an oil resource fund (such as the Alaska Permanent Fund) is to ensure that it benefits the citizens, then there is ‘no better way than to give them cash so they could decide for themselves what to spend it on rather than leaving that decision to the government’ (Goldsmith, 2010: 6). Regarding the effect of perceptions of corruption on preferences for a citizen dividend, the results indicate that respondents who believe that corruption is widespread in the government are more likely to favour a cash transfer scheme. In three out of four models, institutional trust did not show statistical significance, although the sign is correct for all models. Even in Model I, where institutional trust is significantly correlated with preference for cash transfers, the significance level is only 10% (which is rather weak). Nonetheless, because the inclusion of perceived corruption in the same model with institutional trust causes the statistical significance of institutional trust to disappear (Model III), it could be concluded that corruption does destroy people’s faith and trust in government (e.g. Chetwynd et al., 2003; Rothstein, 2010). Consistent with a priori expectations, the results show that higher perceived levels of public corruption increase the odds that the individual will favour cash transfers in all four models testing for the effect of corruption on preference for cash transfers. Among the control variables, the results indicate that older respondents are less likely to express preferences for cash transfers. An increase in age by one year is associated with a 0.20% decrease in the probability that the respondent would favour cash transfers, and this effect was the same across Models IV, V and VI. No gender differences regarding preference for cash transfers was found. Regarding the effect of educational attainment, the results show that respondents who had secondary/post-secondary and university education were significantly less likely to favour cash transfers compared to those who had either primary education only or no formal education. Relative to people with primary education or less, those with secondary/post-secondary were about 4.4% less likely to favour cash transfers, while respondents with university education were between 15.4% and 15.6% less likely to favour cash transfers. It might be the case that these respondents prefer some other uses of the oil revenues; for instance, they might prefer funds to be used to expand infrastructure, or enhance educational and health services rather than for making cash transfers to all eligible citizens. In a country where social support programmes (e.g. unemployment benefits) are lacking, one might intuitively expect that the unemployed would favour cash transfers more: interestingly,it was found that unemployed respondents were less likely to favour cash transfers. A plausible explanation for this is that the unemployed prefer the government to invest the revenues in job-creating projects rather than distributing these revenues to all eligible citizens. Regarding ethnicity, Ewes/Anglos and Dagombas were more likely to express preferences for cash transfers compared to respondents of ‘other ethnic groups’ (see Table 3). There were no significant differences between Akans and ‘other ethnic groups’ with respect to preference for cash transfers. The results do not show a significant effect of political affiliation on preferences for cash

13

Sulemana

Table 3. Effect of trust and perceived corruption in public institutions on preference for citizen dividend in Ghana. Variable

Model I

Trust in public institutions

–0.014* (0.008) [–0.004]

Perceived public corruption

Model II

Model III

Model IV

0.044*** (0.009) [0.013]

–0.004 (0.008) [–0.001] 0.043*** (0.009) [0.013]

–0.010 (0.009) [–0.003]

Age Gender (Ref = Male) Female

Education (Ref = Primary or less) Secondary/Postsecondary University Employment status (Ref = Other) Unemployed Ethnicity (Ref = Other Ethnic group) Akan Ewe/Anglo Dagomba Political affiliation (Ref = Other ) NDC NPP City type (Ref = Rural) Urban

Model V

Model VI

–0.007*** (0.00273) [–0.002]

0.046*** (0.009) [0.013] –0.007** (0.003) [–0.002]

–0.002 (0.009) [–0.001] 0.045*** (0.009) [0.013] –0.007** (0.003) [–0.002]

0.084 (0.082) [0.025]

0.100 (0.083) [0.030]

0.100 (0.083) [0.030]

–0.137 (0.090) [–0.041] –0.514** (0.258) [–0.154]

–0.148* (0.090) [–0.044] –0.528** (0.258) [–0.156]

–0.150* (0.090) [–0.044] –0.529** (0.258) [–0.156]

–0.303*** (0.091) [–0.091]

–0.328*** (0.091) [–0.097]

–0.328*** (0.091) [–0.097]

0.164 (0.101) [0.049] 0.589*** (0.139) [0.176] 0.424** (0.189) [0.127]

0.086 (0.101) [0.025] 0.564*** (0.139) [0.166] 0.410** (0.189) [0.121]

0.083 (0.102) [0.024] 0.561*** (0.139) [0.165] 0.411** (0.189) [0.121]

–0.150 (0.105) [–0.045] –0.116 (0.100) [–0.035]

–0.132 (0.104) [–0.039] –0.116 (0.099) [–0.034]

–0.127 (0.106) [–0.038] –0.119 (0.100) [–0.035]

0.067 (0.086) [0.020] 0.035 66.855(12)*** 57.600 0.295

0.067 (0.086) [0.020] 0.035 66.900(13)*** 57.700 0.295

0.052 (0.086) [0.015] Pseudo – R2 0.023 0.013 0.013 0.001 Likelihood Ratio 2.7470 (1)* 24.034(1)*** 24.204(2)*** 43.837(12)*** 55.900` 53.900 49.400 48.500 (df) 0.299 0.303 0.303 0.307 % Correctly predicted Average density

Note: N =1992. * denotes significance at 10%; ** significant at 5%; *** significant at 1%. Standard errors are in parentheses. Marginal effects (calculated by multiplying the coefficient by the average density) are in brackets.

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transfers. Finally, the study establishes that no significant difference exists between urbanites and rural dwellers with respect to preferences for cash transfers. It can be speculated that urban and rural dwellers in Ghana are not significantly different – as has been demonstrated by other studies in other disciplines (Green et al., 2013; Guildea et al., 2005; Minnes and Woodford, 2005; Sulemana and Issifu, 2015). For instance, in their examination of the predictors of institutional trust in Ghana, Sulemana and Issifu (2015) found no significant differences between rural and urban dwellers with respect to trust in five out of six institutions.

Summary and conclusions For a few decades now, scholars and policy experts have been engaged in developing alternative policy options for natural resource-rich poor countries in order to avoid the resource curse that is often concomitant with resource discovery and production. Citizen dividend, a cash distribution mechanism in which resource revenues are directly paid to citizens as cash transfers, is one such option. However, there are seemingly no published empirical studies examining the preferences for citizen dividend from the citizens’ perspective. This study addresses this absence with a preliminary empirical investigation of the effect of institutional trust and perceived corruption on public preferences for cash transfers from oil revenues in Ghana. Except in one model, where the coefficient on trust was significant at the 10% level, the results do not show a significant effect of trust on preference for cash transfers). However, it was found that individuals who believe corruption to be widespread among public officials were significantly more likely to favour cash transfers. While preferences for a citizen dividend or CCTs in Ghana have been examined here, this paper acknowledges the existence of studies arguing that resource-rich poor countries do not have the institutional or administrative capacity, political will, etc., to implement and administer a citizen dividend successfully (e.g. Hjort, 2006; Sala-i-Martin and Subramanian 2012). Furthermore, Gupta et al. (2014) noted that although cash transfers could be problematic because such a scheme would divert resources from the provision of public goods or encourage rent-seeking, a modest Alaska-style cash transfer scheme is worth considering (Gupta et al., 2014: 4) because this could help directly reduce poverty (Gelb and Majerowicz, 2011; Segal, 2011). We can conclude that more studies are therefore needed to examine the feasibility of a citizen dividend or CCTs in Ghana. Funding The author(s) received no financial support for the research, authorship, and/or publication of this article.

Ethical approval This article does not contain any studies carried out by the author directly involving human participants or animals.

Notes 1. Other terms interchangeably used in the literature include ‘resource dividend’, ‘resource rents’, and ‘citizen fund’. 2. It seems that this programme did not go as well as planned. For instance, the transfers were originally targeted toward low-income households; however, because the Reform Act was not specific about how household incomes would be evaluated to determine eligibility, in the end all citizens were eligible to apply (Guillaume et al., 2011; Hassanzadeh, 2012). I wish to thank an anonymous reviewer for pointing this out to me.

Sulemana

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3. 4. 5. 6.

‘Poverty’ refers to the number of people living on less than US$1 a day. The respondents indicating ‘Don’t know’ were deleted from the sample. The Electoral Commission is included because it conducts elections, especially to elect a ruling party. The NDC and the NPP are the two major political parties in Ghana. It is therefore surprising that the total number respondents who reported being affiliated to these two parties is only 56.2%. It may be worth mentioning that when a similar question was presented to respondents ‘Do you feel close to any particular political party?’ only 62.29% answered ‘yes’. I wish to thank an anonymous reviewer for raising this issue. 7. Since embracing multiparty democracy in Ghana, the incumbent government has had the majority in Parliament. As such the President’s decisions and preferences have a significant influence on what Parliamentary votes. Trust in the President is therefore the most salient of trusts in institutions.

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Author biography Iddisah Sulemana is a lecturer at the Business School of the Ghana Institute of Management and Public Administration (GIMPA). A product of the University of Ghana, Iddi graduated with First Class Honours in 2006 and was awarded the Prof. Ben Amoako Adu’s Award for Best Graduating Student in Economics. He earned a masters degree at the University of Akron in Ohio, USA in 2010 before proceeding to the University of Missouri, USA to obtain his PhD in 2014. Prior to joining GIMPA, Iddi worked at USAA Bank in San Antonio, Texas (USA) as a Credit Risk Analyst. He has published in reputable international journals including Ecological Economics, Journal of Environmental Economics and Policy, The Journal of Development Studies, International Journal of Social Economics, Journal of Environmental Psychology, inter alia. His current research examines the relationships among economic growth, the environment and subjective well-being. He enjoys watching soccer and basketball.