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The Long-Run Effects of Oil Wealth on Development: Evidence from Petroleum Geology

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  • Traviss Cassidy

Abstract

We estimate the long-run effects of oil wealth on development by exploiting spatial variation in sedimentary basins—areas where petroleum can potentially form. Instrumental variables estimates indicate that oil production impedes democracy and fiscal capacity development, increases corruption, and raises GDP per capita without significantly harming the non-resource sectors of the economy. We find no evidence that oil production increases internal armed conflict, coup attempts, or political purges. In several specifications failure to account for endogeneity leads to substantial underestimation of the adverse effects of oil, suggesting that countries with higher-quality political institutions and greater fiscal capacity disproportionately select into oil production.

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  • Traviss Cassidy, 2019. "The Long-Run Effects of Oil Wealth on Development: Evidence from Petroleum Geology," Economic Journal, Royal Economic Society, vol. 129(623), pages 2745-2778.
  • Handle: RePEc:oup:econjl:v:129:y:2019:i:623:p:2745-2778.
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    Cited by:

    1. Indra de Soysa & Tim Krieger & Daniel Meierrieks, 2020. "Oil Wealth and Property Rights," CESifo Working Paper Series 8319, CESifo.
    2. Bergougui, Brahim & Murshed, Syed Mansoob, 2020. "New evidence on the oil-democracy nexus utilising the Varieties of Democracy data," Resources Policy, Elsevier, vol. 69(C).
    3. James Cust & Torfinn Harding & Pierre-Louis Vézina, 2019. "Dutch Disease Resistance: Evidence from Indonesian Firms," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 6(6), pages 1205-1237.
    4. Jubril Animashaun & Ada Wossink, 2020. "Patriarchy, Pandemics and the Gendered Resource Curse Thesis: Evidence from Petroleum Geology," Economics Discussion Paper Series 2006, Economics, The University of Manchester.
    5. Cassidy, Traviss, 2017. "How Forward-Looking Are Local Governments? Evidence from Indonesia," MPRA Paper 97776, University Library of Munich, Germany, revised 01 Jun 2019.

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    More about this item

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • Q35 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Hydrocarbon Resources

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