A Leadership Curse? Oil Price Shocks and the Selection of National Leaders

This paper examines the relation between oil price shocks and the selection of educated national leaders. Exploiting a cross-country dataset on national leaders and a Difference-in-Difference approach, I find that positive oil price shocks significantly reduce the probability of selecting educated leaders--a ‘leadership curse’. I show that this phenomenon is driven by ethnically fragmented developing countries. I develop a model where a coalition of ethnic chiefs offers an electoral support to candidates in exchange for future favors. The model shows that positive oil price shocks deter the candidacy of educated citizens by allowing the coalition to tax the expected payoff from office. Hence, elites bargaining may constrain the ability of citizens to induce significant changes through the ballot box. The paper adds to the political aspects of the “resource curse” by showing that resource booms affect the “quality” of politicians before they take office.