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Venezuela's collapse: Exogenous shock or institutional design?

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  • Jorge Jraissati
  • Keith Jakee

Abstract

Venezuela was the fastest‐growing economy of the twentieth century until the 1970s, and it still has the world's largest known oil reserves. Yet in recent years, it has experienced the greatest economic collapse in South America's history, condemning 96 per cent of its people to poverty. Much of the existing literature blames foreign sanctions or a decline in oil prices, or both. We disagree, arguing the breakdown was caused by explicit institutional changes that politicised the oil industry and replaced market mechanisms with central planning. The institutional restructuring also disregarded monetary stability and basic infrastructure, including electricity supply, telecommunications, and even security.

Suggested Citation

  • Jorge Jraissati & Keith Jakee, 2022. "Venezuela's collapse: Exogenous shock or institutional design?," Economic Affairs, Wiley Blackwell, vol. 42(2), pages 344-360, June.
    • Handle: RePEc:bla:ecaffa:v:42:y:2022:i:2:p:344-360
    DOI: 10.1111/ecaf.12537
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    References listed on IDEAS

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    1. McBeth, Brian S., 2009. "Venezuela's Nascent Oil Industry and the 1932 US Tariff on Crude Oil Imports, 1927–1935," Revista de Historia Económica / Journal of Iberian and Latin American Economic History, Cambridge University Press, vol. 27(3), pages 427-462, January.
    2. John Baffes & M. Ayhan Kose & Franziska Ohnsorge & Marc Stocker, 2015. "The great plunge in oil prices: causes, consequences, and policy responses," CAMA Working Papers 2015-23, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    3. Daron Acemoglu & James A. Robinson, 2008. "Distinguished Guest Lecture: The Persistence and Change of Institutions in the Americas," Southern Economic Journal, John Wiley & Sons, vol. 75(2), pages 282-299, October.
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    6. Mariano Tommasi & Pablo T. Spiller & Ernesto Stein, 2003. "Political Institutions, Policymaking Processes, and Policy Outcomes. An Intertemporal Transactions Framework," Working Papers 59, Universidad de San Andres, Departamento de Economia, revised Jul 2003.
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    Cited by:

    1. Aray, Henry & Vera, David, 2024. "A tale of oil production collapse," Resources Policy, Elsevier, vol. 93(C).

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