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Income inequality and oil resources: Panel evidence from the United States

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  • Berisha, Edmond
  • Chisadza, Carolyn
  • Clance, Matthew
  • Gupta, Rangan

Abstract

The resource curse is sometimes associated with poor resource-rich countries. However, using panel evidence from the United States, we find that the resource curse is also prevalent in a wealthy resource-rich country. This study investigates the impact of oil resources on income inequality, with a particular focus on distinguishing between the effects from oil abundance (i.e. production) versus oil dependency (i.e. consumption). We observe contrasting non-monotonic outcomes from oil abundance in comparison to oil dependency. For oil abundance, states with low oil production will have less inequality if they increase oil production, and states with high oil production will have increased income inequality if they increase production. The opposite holds true for oil dependency. The findings suggest several channels of concern. For example, oil-rich states are more vulnerable to rent-seeking behaviour as oil production and oil revenues increase, which can adversely affect the income distribution gap. On the other hand, oil-dependent states are more likely to be affected by commodity price shocks which can increase income inequality.

Suggested Citation

  • Berisha, Edmond & Chisadza, Carolyn & Clance, Matthew & Gupta, Rangan, 2021. "Income inequality and oil resources: Panel evidence from the United States," Energy Policy, Elsevier, vol. 159(C).
    • Handle: RePEc:eee:enepol:v:159:y:2021:i:c:s0301421521004699
    DOI: 10.1016/j.enpol.2021.112603
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    More about this item

    Keywords

    Oil resources; Income inequality; United States JEL Classification: D63; O13; O51;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada

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