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Oil windfalls might not be the problem in oil-producing countries: evidence from the impact of oil shocks on export diversification

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  • Eric W. Djimeu
  • Luc-Désiré Omgba

Abstract

This paper examines the factors behind export diversification in oil countries. Specifically, by investigating the impact of oil booms on export diversification through a difference-in-difference framework, this paper finds that the economy’s export structure before oil boom determines whether oil windfalls might affect the diversification process. Thus, an oil boom negatively affects export diversification only if countries initially exhibit low levels of diversification. In countries with a high level of diversification before the boom, an oil boom has no impact on diversification. These results are based on a large sample of 134 countries, and are robust to various sensitivity analyses. They are corroborated with data from the manufacturing sector, which show that oil booms only reduce diversification in countries with a small manufacturing sector prior to the boom. The results suggest that the initial constraints, which hampered the emergence of entrepreneurs’ class prior the boom, are key elements of the failure of a diversification process in resource rich countries.

Suggested Citation

  • Eric W. Djimeu & Luc-Désiré Omgba, 2018. "Oil windfalls might not be the problem in oil-producing countries: evidence from the impact of oil shocks on export diversification," EconomiX Working Papers 2018-18, University of Paris Nanterre, EconomiX.
  • Handle: RePEc:drm:wpaper:2018-18
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    File URL: https://economix.fr/pdf/dt/2018/WP_EcoX_2018-18.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Export diversification; Oil resources; Panel data;

    JEL classification:

    • F1 - International Economics - - Trade
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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