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Oil Discovery, Political Institutions and Economic Diversification

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  • Nouf Alsharif
  • Sambit Bhattacharya

Abstract

Classical theory predicts that petroleum rich countries would specialise in petroleum products. Yet diversification is touted as a desirable policy objective for petroleum rich nations because it reduces exposure to volatility. Given such theoretical ambiguity, it is important to understand the empirical relationship between petroleum and diversification. In this paper, we test the effect of giant oil discoveries on diversification using a panel dataset covering up to 136 countries and the period 1962 to 2012. After controlling for country and year fixed effects, we find evidence of non-oil export concentration 8 years after a discovery. However, we do not observe any effect on the structure of employment in the non-resource and manufacturing sectors. It appears that democratic political institutions moderate the export concentration effect of petroleum discovery. Countries with weak political institutions experience employment concentration in the non-tradable sector post discovery.

Suggested Citation

  • Nouf Alsharif & Sambit Bhattacharya, 2016. "Oil Discovery, Political Institutions and Economic Diversification," CSAE Working Paper Series 2016-19, Centre for the Study of African Economies, University of Oxford.
    • Handle: RePEc:csa:wpaper:2016-19
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    Cited by:

    1. Shehabi, Manal, 2020. "Diversification effects of energy subsidy reform in oil exporters: Illustrations from Kuwait," Energy Policy, Elsevier, vol. 138(C).
    2. Nouf Alsharif & Sambit Bhattacharyya, 2022. "Oil Discovery, Boom-Bust Cycle and Manufacturing Slowdown: Evidence from a Large Industry Level Dataset," Working Paper Series 0222, Department of Economics, University of Sussex Business School.
    3. Nouf Alsharif & Sambit Bhattacharyya & Maurizio Intartaglia, 2016. "Economic Diversification in Resource Rich Countries: Uncovering the State of Knowledge," Working Paper Series 09816, Department of Economics, University of Sussex Business School.
    4. Abdalla Alfaki, Ibrahim M. & El Anshasy, Amany A., 2022. "Oil rents, diversification and growth: Is there asymmetric dependence? A copula-based inquiry," Resources Policy, Elsevier, vol. 75(C).
    5. Nouf Alsharif & Sambit Bhattacharyya & Maurizio Intartaglia, 2016. "Economic Diversification in Resource Rich Countries: Uncovering the State of Knowledge," Working Paper Series 9816, Department of Economics, University of Sussex.
    6. Sabna Ali & Syed Mansoob Murshed & Elissaios Papyrakis, 2023. "Oil, export diversification and economic growth in Sudan: evidence from a VAR model," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 36(1), pages 77-96, January.

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    More about this item

    Keywords

    Oil Discovery; Political Institutions; Structural Change; Export Diversification;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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