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Oil and democracy: More than a cross-country correlation?

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  • Silje Aslaksen

    (Department of Economics, University of Oslo, silje.aslaksen@econ.uio.no)

Abstract

This article revisits the empirical relationship between oil and democracy. Existing studies establish a negative cross-country correlation between oil and democracy in a Pooled OLS framework. This insight has recently been challenged by claiming that it suffers from omitted variables, and that including country fixed effects removes the statistical association between oil and democracy. This article argues that because of the high persistence of democracy and oil, the findings of no effect of oil on democracy suffers from weak instrument problems and is not informative. Indeed, this article shows that levels of oil systematically predict both levels and changes in democracy in a sample of up to 156 countries between 1972 and 2002. By considering a different identification assumption for oil and by using additional and more informative moment conditions to instrument the regressors, this article demonstrates that the relationship between oil and democracy is negative also when country fixed effects are taken into account. This result holds for alternative measures of democracy and alternative measures of oil abundance; it is robust when including additional covariates and when removing major oil producers.

Suggested Citation

  • Silje Aslaksen, 2010. "Oil and democracy: More than a cross-country correlation?," Journal of Peace Research, Peace Research Institute Oslo, vol. 47(4), pages 421-431, July.
  • Handle: RePEc:sae:joupea:v:47:y:2010:i:4:p:421-431
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    File URL: http://jpr.sagepub.com/content/47/4/421.abstract
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    Cited by:

    1. Gustav Lidén, 2013. "What about theory? The consequences on a widened perspective of social theory," Quality & Quantity: International Journal of Methodology, Springer, vol. 47(1), pages 213-225, January.
    2. Mehrdad Vahabi, 2017. "A critical survey of the resource curse literature through the appropriability lens," CEPN Working Papers 2017-14, Centre d'Economie de l'Université de Paris Nord.
    3. Wiig, Arne & Kolstad, Ivar, 2012. "If diversification is good, why don't countries diversify more? The political economy of diversification in resource-rich countries," Energy Policy, Elsevier, vol. 40(C), pages 196-203.
    4. Omgba, Luc Désiré, 2015. "Why Do Some Oil-Producing Countries Succeed in Democracy While Others Fail?," World Development, Elsevier, vol. 76(C), pages 180-189.
    5. Tcheta-Bampa, Albert & Kodila-Tedika, Oasis, 2018. "Conditions institutionnelles de la malédiction des ressources naturelles en Afrique sur les performances économiques
      [Institutional conditions of the natural resource curse in Africa on economic pe
      ," MPRA Paper 86511, University Library of Munich, Germany.
    6. Eoin McGuirk, 2013. "The illusory leader: natural resources, taxation and accountability," Public Choice, Springer, vol. 154(3), pages 285-313, March.
    7. Ivar Kolstad & Abel Kinyondo, 2015. "Alternatives to local content," WIDER Working Paper Series 106, World Institute for Development Economic Research (UNU-WIDER).
    8. Armey, Laura E. & McNab, Robert M., 2012. "Democratization and civil war," MPRA Paper 42460, University Library of Munich, Germany.
    9. Daniel Treisman, 2010. "Oil and Democracy in Russia," NBER Working Papers 15667, National Bureau of Economic Research, Inc.
    10. Tcheta-Bampa, Tcheta-Bampa & Kodila-Tedika, Oasis, 2018. "Dynamisation de la malédiction des ressources naturelles en Afrique sur les performances économiques : institution et guerre froide
      [Curse of Natural Resources and Economic Performance in Africa: I
      ," MPRA Paper 86510, University Library of Munich, Germany.
    11. Borge, Lars-Erik & Parmer, Pernille & Torvik, Ragnar, 2015. "Local natural resource curse?," Journal of Public Economics, Elsevier, vol. 131(C), pages 101-114.
    12. Andersen, Jørgen Juel & Aslaksen, Silje, 2013. "Oil and political survival," Journal of Development Economics, Elsevier, vol. 100(1), pages 89-106.
    13. Che, Yi & Lu, Yi & Tao, Zhigang & Wang, Peng, 2013. "The impact of income on democracy revisited," Journal of Comparative Economics, Elsevier, vol. 41(1), pages 159-169.
    14. Nuri Aras, Osman & Suleymanov, Elchin & Zeynalov, Ayaz, 2012. "Does Oil Income Impede Democratization In Muslim– Majority Countries?," MPRA Paper 52236, University Library of Munich, Germany.
    15. Pernille Parmer, 2014. "Natural Rerources and public Sector Wages," Working Paper Series 16114, Department of Economics, Norwegian University of Science and Technology.
    16. John Anyanwu & Andrew E. O. Erhijakpor, 2013. "Working Paper 184 - Does Oil Wealth Affect Democracy in Africa?," Working Paper Series 988, African Development Bank.
    17. Matthias Busse & Steffen Gröning, 2013. "The resource curse revisited: governance and natural resources," Public Choice, Springer, vol. 154(1), pages 1-20, January.
    18. Carreri, Maria & Dube, Oeindrila, 2016. "Do Natural Resources Influence Who Comes to Power, and How?," CEPR Discussion Papers 11136, C.E.P.R. Discussion Papers.
    19. Prichard, Wilson, 2015. "Reassessing Tax and Development Research: A New Dataset, New Findings, and Lessons for Research," Working Papers 13654, Institute of Development Studies, International Centre for Tax and Development.
    20. Ivar Kolstad & Arne Wiig, 2014. "Diversification and democracy," CMI Working Papers 9, CMI (Chr. Michelsen Institute), Bergen, Norway.
    21. Al-Ubaydli, Omar, 2012. "Natural resources and the tradeoff between authoritarianism and development," Journal of Economic Behavior & Organization, Elsevier, vol. 81(1), pages 137-152.
    22. Prichard, Wilson, 2016. "Reassessing Tax and Development Research: A New Dataset, New Findings, and Lessons for Research," World Development, Elsevier, vol. 80(C), pages 48-60.
    23. Mahdavi, Paasha, 2014. "Why do leaders nationalize the oil industry? The politics of resource expropriation," Energy Policy, Elsevier, vol. 75(C), pages 228-243.
    24. Kevin K. Tsui, 2010. "Resource Curse, Political Entry, And Deadweight Costs," Economics and Politics, Wiley Blackwell, vol. 22(3), pages 471-497, November.

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    Keywords

    democracy; oil; resource curse;

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