Signaling

The Extractive Industry Transparency Initiative is a multisectoral initiative designed to help resource rich developing countries improve their governance. Although adherence to EITI is voluntary, implementing governments are obligated to publish resource revenues and firms operating in these countries are obligated to publish what they pay governments to extract these resources. These governments are also obligated to set up multistakeholder monitoring groups to examine how governments use extractive industry revenues. Citizen participation is the foundation of the EITI, but several participating governments are not known for their respect for political, civil, and other human rights. Yet many of these governments are allowing public participation in the EITI. Using a survey of extractive companies, primary source evidence and various data sets, I examine government behavior under the EITI. I seek to answer why repressive as well as democratic states are implementing EITI. I find many of these countries are making governance improvements prior to and as they implement EITI. The leaders seem to understand that they need to make grassroots as well as top down governance changes. I hypothesize that some of these countries, including relatively repressive states such as Azerbaijan, are trying to signal to investors and lenders that they ar