Effects Of Oil Wealth Research Articles

Outlier analysis: Natural resources and immigration policy.

This replication underlines the importance of outlier diagnostics since many researchers have long neglected influential observations in OLS regression analysis. In his article, entitled “Primary Resources, Secondary Labor,” Shin finds that advanced democracies with increased natural resource wealth, particularly from oil and natural gas production, are more likely to restrict low-skill immigration policy. By performing outlier diagnostics, this replication shows that Shin’s findings are a statistical artifact. When one outlying country, Norway, is removed from the sample data, I observe almost no significant and negative relationship between oil wealth and immigration policy. When two outlying countries are excluded, the effect of oil wealth completely disappears. Robust regression analysis, a widely used remedial method for outlier problems, confirms the results of my outlier diagnostics.

Male‐biased Demand Shocks and Women's Labour Force Participation: Evidence from Large Oil Field Discoveries

Do male‐biased labour demand shocks affect women's labour market outcomes? To study this question, we examine large oil field discoveries in the southern USA from 1900 to 1940. We find that oil wealth has an overall positive effect on female labour force participation that is driven by single women. While oil discoveries increase demand for male labour and raise male wages, they do not drive women out of the tradable goods sector or the labour force. Our findings suggest that the absence of any crowding out effects of oil wealth can be explained by compensating forces such as demand effects within the tradable sector, or by income effects that lead to growth in the non‐tradable sector.

Fueling development? Assessing the impact of oil and soybean wealth on municipalities in Brazil

The commodity boom of the 2000s, which now came to an end, represented a windfall to resource-rich countries. However, the benefits − or potential curse − likely had heterogeneous effects at the local level, with the potential to increase regional or income inequalities within countries. This paper examines the impact of the international commodity boom during the first decade of the 2000s on different parts of Brazil. Using a range of quantitative techniques, it estimates the changes in development and inequality indicators between 2000 and 2010 among oil rich, soybean rich, and resource poor control municipalities. Our results indicate both that there is a “catch-up” effect benefitting less developed, resource poor municipalities, and that oil rich municipalities may be experiencing some of the dynamics associated with a resource curse. These findings are broadly in line with existing empirical research on the effect of oil wealth on local development in Brazil. We argue that national-level institutions and social programs that redistribute the windfall and constrain how local governments spend their resources likely constitute part of the reason for why regional inequalities have not been exacerbated as a result of the boom and local resources curses are at most incipient.

The Long-Run Effects of Oil Wealth on Democracy and Fiscal Capacity

We estimate the long-run effects of oil wealth on development by exploiting spatial variation in sedimentary basins --- areas where petroleum can potentially form. Instrumental variables estimates indicate that oil production impedes democracy and fiscal capacity development, increases government purges, and raises GDP per capita. Oil production may also increase corruption and internal armed conflict, however these point estimates are less precise. In many specifications failure to account for endogeneity leads to substantial underestimation of the adverse effects of oil, suggesting that countries with higher-quality political institutions and greater fiscal capacity disproportionately select into oil production. Countries that had weak executive constraints from 1950-1965 experienced the largest adverse effects of oil on democracy and fiscal capacity, yet they benefited the most in terms of income.

Does Oil Wealth Affect Democracy in Africa?

This paper uses recent data on historical oil wealth to provide new evidence on the effect of oil wealth on democracy in Africa from 1955 to 2008. We find that oil wealth is statistically associated with a lower likelihood of democratization when we estimate the relationship in a pooled cross-sectional and time-series setting. In addition, when estimated using fixed effects and IV-2SLS methods, the strong negative statistical association continues to hold. Indeed, this result is robust to the source of oil wealth data, the choice and treatment of the variables set, and the sample selection. Our results also show other interesting and important results. The cross-country evidence examined in the study confirms that the ‘Lipset/Aristotle/modernization hypothesis’ (that prosperity stimulates democracy) is a strong empirical regularity. Also, the propensity for democracy rises with population size, population density, ethnic fractionalization, having British legal origin or colonial heritage, and having a supportive institutional environment in the form of maintenance of the rule of law. However, apart from oil wealth, democracy tends to fall with linguistic fractionalization and rough (mountainous) terrain. Moreover, consistent with the data, North Africa consistently fails to favor democratic development.

Cursed resources, or articulations of economic theory in the Gulf of Guinea

Economic experiments, or attempts to shape national and local economies with the help of economic theory, have been typical of post-war development efforts. Economic sociologists have explored the role of such experiments to demonstrate how economics – as a set of practices, ideas and technologies – enacts its worlds. This paper examines one such case of high-powered economic theory and its enactment in an emergent West African oil economy by focusing on economist Jeffrey Sachs's advisory project in São Tomé and Príncipe. It pivots on the ‘resource curse’, an economic device that has recently gained purchase in global policy circles. This paper argues that economic devices are not simply imposed on pre-arranged worlds. Instead, they collide with and adjust to already existing politico-economic and socio-cultural conditions, resulting in complex articulations. Drawing on ethnographic material, I critique the ability of the resource curse to make sense fully of apprehensions of the past, present and future consequences of extractive industry developments. Contrasting economic accounts of an incipient curse with competing and complementary local accounts of the effects of oil wealth, I propose a new model for the sociological analysis of the variety of articulations into which an economic device, such as the curse, may enter.

Petrostates and Private Sectors: Regulating Business and Markets in Resource-Rich Countries

Oil-rich countries such as Iran, Nigeria, and Russia are often cited as among the most difficult places in the world to open and operate a business. Is this observation a widespread phenomenon among oil-rich countries and can it be explained by the mere presence of oil? If so, what is the causal process? Statistical techniques using data on over 150 countries provide evidence that, all else equal, higher oil and gas income leads to higher regulatory barriers to opening a firm and less access to credit. An analysis of Iran illustrates how the introduction of massive oil revenues resulted in heightened rent-seeking from private sector elites and increased regulatory barriers to owners of small and medium-sized capital. This study makes a number of contributions to the writings in political economy on natural resources and the so-called curse phenomenon. For one, it offers an initial investigation into the effects of oil wealth on regulatory policy-making and the quality of a country's business environment. Second, its focus on political and regulatory factors provides an alternative causal story to the Dutch Disease argument that has long served as the traditional explanation for the resource curse.

Perilous Petrodollars: The Effects of Oil Wealth on Democratization

This paper examines the relationship between oil wealth and democratic reform. This relationship is especially problematic for states that were less developed prior to the discovery of oil. The large oil revenues of authoritarian rentier states, coupled with limited mechanisms for distributional accountability and political participation, ensure a difficult road ahead for democratic reforms in such countries. As long as global dependence on oil persists, the internal politics of oil-rich states will remain extremely important. Hence, it is necessary to understand the ways in which oil impedes democracy in order to look for viable solutions.