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Oil Price Shocks, Income, and Democracy

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  • Markus Brückner
  • Antonio Ciccone
  • Andrea Tesei

Abstract

We examine the effect of oil price fluctuations on democratic institutions over the 1960-2007 period. We also exploit the very persistent response of income to oil price fluctuations to study the effect of persistent (oil price-driven) income shocks on democracy. Our results indicate that countries with greater net oil exports over GDP see improvements in democratic institutions following upturns in international oil prices. We estimate that a 1 percentage point increase in per capita GDP growth due to a positive oil price shock increases the Polity democracy score by around 0.2 percentage points on impact and by around 2 percentage points in the long run. The effect on the probability of a democratic transition is around 0.4 percentage points.

Suggested Citation

  • Markus Brückner & Antonio Ciccone & Andrea Tesei, 2013. "Oil Price Shocks, Income, and Democracy," Working Papers 2013-18, FEDEA.
    • Handle: RePEc:fda:fdaddt:2013-18
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    JEL classification:

    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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