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Oil rents, corruption, and state stability: Evidence from panel data regressions

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  • Arezki, Rabah
  • Brückner, Markus

Abstract

We examine the effects of oil rents on corruption and state stability exploiting the exogenous within-country variation of a new measure of oil rents for a panel of 30 oil-exporting countries during the period 1992–2005. We find that an increase in oil rents significantly increases corruption, significantly deteriorates political rights while at the same time leading to a significant improvement in civil liberties. We argue that these findings can be explained by the political elite having an incentive to extend civil liberties but reduce political rights in the presence of oil windfalls to evade redistribution and conflict. We support our argument documenting that there is a significant effect of oil rents on corruption in countries with a high share of state participation in oil production while no such link exists in countries where state participation in oil production is low.

Suggested Citation

  • Arezki, Rabah & Brückner, Markus, 2011. "Oil rents, corruption, and state stability: Evidence from panel data regressions," European Economic Review, Elsevier, vol. 55(7), pages 955-963.
  • Handle: RePEc:eee:eecrev:v:55:y:2011:i:7:p:955-963
    DOI: 10.1016/j.euroecorev.2011.03.004
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    References listed on IDEAS

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    1. Bhattacharyya, Sambit & Hodler, Roland, 2010. "Natural resources, democracy and corruption," European Economic Review, Elsevier, vol. 54(4), pages 608-621, May.
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    More about this item

    Keywords

    Oil rents; Corruption; State stability; State participation;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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