IDEAS home Printed from https://ideas.repec.org/p/bsu/wpaper/201002.html
   My bibliography  Save this paper

Oil and Conflict: What Does the Cross-Country Evidence Really Show?

Author

Listed:
  • Anca Cotet

    () (Department of Economics, Ball State University)

  • Kevin K. Tsui

    () (The John E. Walker Department of Economics, Clemson University)

Abstract

This paper examines the effect of oil abundance on political violence. First, we revisit one of the main empirical findings of the civil conflict literature that oil abundance causes civil war. Using a unique panel dataset describing worldwide oil discoveries and extractions, we show that simply controlling for country fixed effects removes the statistical association between oil reserves and civil war in a sample of more than 100 countries over the period 1930-2003. Other macro-political violence measures, such as coup attempts and irregular leader transitions, are not affected by oil reserves either. Rather, we find that oil-rich nondemocratic countries have a larger defense burden. To further address the problems of endogeneity and measurement error, we exploit randomness in the success or failure of oil explorations. We find that oil discoveries do not increase the likelihood of violent challenges to the state in the sample of country-years in which at least one exploratory well is drilled, and oil discoveries increase military spending in the subsample of nondemocratic countries. Similar results are obtained on a larger sample which includes country-years without oil exploration while controlling for selection based on the likelihood of exploration using propensity score matching. We suggest a possible explanation for our findings based on the idea that oil-rich nondemocratic regimes effectively expend resources to deter potential challengers.

Suggested Citation

  • Anca Cotet & Kevin K. Tsui, 2010. "Oil and Conflict: What Does the Cross-Country Evidence Really Show?," Working Papers 201002, Ball State University, Department of Economics, revised Mar 2010.
  • Handle: RePEc:bsu:wpaper:201002
    as

    Download full text from publisher

    File URL: http://web.bsu.edu/cob/econ/research/papers/bsuecwp201002cotet.pdf
    File Function: First version, Feburary 2010
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Alesina, Alberto & Devleeschauwer, Arnaud & Easterly, William & Kurlat, Sergio & Wacziarg, Romain, 2003. "Fractionalization," Journal of Economic Growth, Springer, vol. 8(2), pages 155-194, June.
    2. Gary S. Becker & Tomas J. Philipson & Rodrigo R. Soares, 2005. "The Quantity and Quality of Life and the Evolution of World Inequality," American Economic Review, American Economic Association, pages 277-291.
    3. Daron Acemoglu & Simon Johnson, 2007. "Disease and Development: The Effect of Life Expectancy on Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 115(6), pages 925-985, December.
    4. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, pages 29-51.
    5. Dan A. Black & Natalia Kolesnikova & Seth G. Sanders & Lowell J. Taylor, 2013. "Are Children “Normal”?," The Review of Economics and Statistics, MIT Press, pages 21-33.
    6. Daron Acemoglu & Amy Finkelstein & Matthew J. Notowidigdo, 2013. "Income and Health Spending: Evidence from Oil Price Shocks," The Review of Economics and Statistics, MIT Press, pages 1079-1095.
    7. Dan A. Black & Natalia Kolesnikova & Seth G. Sanders & Lowell J. Taylor, 2013. "Are Children “Normal”?," The Review of Economics and Statistics, MIT Press, pages 21-33.
    8. Michael Alexeev & Robert Conrad, 2009. "The Elusive Curse of Oil," The Review of Economics and Statistics, MIT Press, pages 586-598.
    9. David E. Bloom & David Canning & Günther Fink, 2014. "Disease and Development Revisited," Journal of Political Economy, University of Chicago Press, pages 1355-1366.
    10. Benjamin, Daniel K & Kochin, Levis A, 1982. "A Proposition on Windfalls and Taxes When Some but Not All Resources Are Mobile," Economic Inquiry, Western Economic Association International, vol. 20(3), pages 393-404, July.
    11. Gary S. Becker & Tomas J. Philipson & Rodrigo R. Soares, 2005. "The Quantity and Quality of Life and the Evolution of World Inequality," American Economic Review, American Economic Association, pages 277-291.
    12. Eric Rasmusen & Young-Ro Yoon, 2008. "First versus Second-Mover Advantage with Information Asymmetry about the Size of New Markets," Working Papers 2008-15, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    13. Timothy Besley & Masayuki Kudamatsu, 2006. "Health and Democracy," American Economic Review, American Economic Association, pages 313-318.
    14. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
    15. Alexeev, Michael & Conrad, Robert, 2011. "The natural resource curse and economic transition," Economic Systems, Elsevier, vol. 35(4), pages 445-461.
    16. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, pages 29-51.
    17. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, pages 47-82.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    resource curse; oil discoveries; civil conflict; defense burden;

    JEL classification:

    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • Q34 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Natural Resources and Domestic and International Conflicts

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bsu:wpaper:201002. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tung Liu). General contact details of provider: http://edirc.repec.org/data/debsuus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.