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Oil, Politics, and Corrupt Bastards

Author

Listed:
  • Alexander James

    (University of Alaska Anchorage)

  • Nathaly M. Rivera

    (University of Alaska Anchorage)

Abstract

We develop an analytical framework in which a natural-resource-extracting firm pays an incumbent politician both legal and illegal bribes in exchange for reductions in the severance tax rate. A positive resource shock increases the marginal benefit of a tax cut and more bribes are given. We test this theory using forty years of U.S. state-level data, measuring legal corruption as contributions to political campaigns from the oil and gas sector, and illegal corruption as both convictions of public corruption and "reflections'' of it, measured as the frequency that words like "corrupt'', "fraud'', and "bribery’’—and their iterations—appear in local newspapers. We find that oil-rich U.S. states are significantly more corrupt than their oil-poor counterparts and that this is especially true during periods of high oil prices, suggesting an underlying causal relationship. Our findings are robust to a variety of modeling assumptions and specifications suggesting that oil—through its effect on political corruption—plays an indirect, critically important, and yet previously overlooked role in shaping public and economic outcomes in the United States.

Suggested Citation

  • Alexander James & Nathaly M. Rivera, 2019. "Oil, Politics, and Corrupt Bastards," Working Papers 2019-04, University of Alaska Anchorage, Department of Economics.
  • Handle: RePEc:ala:wpaper:2019-04
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    File URL: http://www.econpapers.uaa.alaska.edu/RePEC/ala/wpaper/ALA201904.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Oil; Rents; Political Corruption; Campaign Finance; Bribery;
    All these keywords.

    JEL classification:

    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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