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Oil and Conflict: What Does the Cross-Country Evidence Really Show?

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  • Anca Cotet

    ()
    (Department of Economics, Ball State University)

  • Kevin K. Tsui

    ()
    (The John E. Walker Department of Economics, Clemson University)

Abstract

This paper examines the effect of oil abundance on political violence. First, we revisit one of the main empirical findings of the civil conflict literature that oil abundance causes civil war. Using a unique panel dataset describing worldwide oil discoveries and extractions, we show that simply controlling for country fixed effects removes the statistical association between oil reserves and civil war in a sample of more than 100 countries over the period 1930-2003. Other macro-political violence measures, such as coup attempts and irregular leader transitions, are not affected by oil reserves either. Rather, we find that oil-rich nondemocratic countries have a larger defense burden. To further address the problems of endogeneity and measurement error, we exploit randomness in the success or failure of oil explorations. We find that oil discoveries do not increase the likelihood of violent challenges to the state in the sample of country-years in which at least one exploratory well is drilled, and oil discoveries increase military spending in the subsample of nondemocratic countries. Similar results are obtained on a larger sample which includes country-years without oil exploration while controlling for selection based on the likelihood of exploration using propensity score matching. We suggest a possible explanation for our findings based on the idea that oil-rich nondemocratic regimes effectively expend resources to deter potential challengers.

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File URL: http://econfac.iweb.bsu.edu/research/workingpapers/bsuecwp201002cotet.pdf
File Function: First version, Feburary 2010
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Bibliographic Info

Paper provided by Ball State University, Department of Economics in its series Working Papers with number 201002.

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Length: 39 pages
Date of creation: Mar 2010
Date of revision: Mar 2010
Handle: RePEc:bsu:wpaper:201002

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Keywords: resource curse; oil discoveries; civil conflict; defense burden;

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Cited by:
  1. Massimo Morelli & Dominic Rohner, 2014. "Resource Concentration and Civil Wars," NBER Working Papers 20129, National Bureau of Economic Research, Inc.
  2. Yu-Hsiang Lei & Guy Michaels, 2012. "Do Giant Oilfield Discoveries Fuel Internal Armed Conflicts?," OxCarre Working Papers 067, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
  3. Vincenzo Bove & Roberto Nisticò, 2014. "Coups d'état and Defense Spending: A Counterfactual Analysis," CSEF Working Papers 366, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  4. Francesco Caselli & Massimo Morelli & Dominic Rohner, 2013. "The Geography of Inter-State Resource Wars," HiCN Working Papers 146, Households in Conflict Network.
  5. Al-Ubaydli, Omar, 2012. "Natural resources and the tradeoff between authoritarianism and development," Journal of Economic Behavior & Organization, Elsevier, vol. 81(1), pages 137-152.
  6. Enrique Calfucura, 2011. "Natural Resources, Conflict and Democratization," Working Papers 30, Facultad de Economía y Empresa, Universidad Diego Portales.
  7. Cockx, Lara & Francken, Nathalie, 2014. "Extending the concept of the resource curse : Natural resources and public spending on health," IOB Working Papers 2014.01, Universiteit Antwerpen, Institute of Development Policy and Management (IOB).
  8. Nicolas Berman & Mathieu Couttenier, 2012. "External shocks, internal shots - the geography of civil conflicts," IHEID Working Papers 13-2012, Economics Section, The Graduate Institute of International Studies.
  9. Andersen, Jørgen Juel & Aslaksen, Silje, 2013. "Oil and political survival," Journal of Development Economics, Elsevier, vol. 100(1), pages 89-106.
  10. Eoin F. McGuirk & Eoin F. McGuirk, 2010. "The Illusory Leader: Natural Resources, Taxation and Accountability," The Institute for International Integration Studies Discussion Paper Series iiisdp327, IIIS.
  11. Samuel Bazzi, Christopher Blattman, 2011. " Economic Shocks and Conflict: The (Absence of?) Evidence from Commodity Price- Working Paper 274," Working Papers 274, Center for Global Development.
  12. Jason Chan & Anindya Ghose & Robert Seamans, 2013. "The Internet and Hate Crime: Offline Spillovers from Online Access," Working Papers 13-02, NET Institute.
  13. John Anyanwu & Andrew E. O. Erhijakpor, 2013. "Working Paper 184 - Does Oil Wealth Affect Democracy in Africa?," Working Paper Series 988, African Development Bank.
  14. Maystadt, Jean-François & Trinh Tan, Jean-François & Breisinger, Clemens, 2014. "Does food security matter for transition in Arab countries?," Food Policy, Elsevier, vol. 46(C), pages 106-115.

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