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Inflated Expectations and Commodity Prices: Evidence from Kazakhstan

Author

Listed:
  • Girard, Victoire
  • Kudebayeva, Alma
  • Toews, Gerhard

Abstract

We document that an oil price boom triggers dissatisfaction with one's income, and that this dissatisfaction is independent of the effect of the boom on real economic conditions. Unique data from Kazakhstan allows us to exploit time, sectoral and spatial variation to identify the impact of the recent oil boom on reported satisfaction with income. Oil related households { whose heads are employed in the private sector of the oil rich districts { report a decrease in satisfaction with their income during the boom compared to other households (whose heads work in other sectors and/or districts). The estimated drop in satisfaction is statistically and economically significant: a 20% increase in the price of oil decreases satisfaction with income by 1/3 of a standard deviation. We discuss different interpretations of this drop in satisfaction. The only interpretation consistent with our results is that an oil price boom creates a gap between people's expectations of the benefits from the boom and the observed economic conditions. Our results call for devoting more attention to the dynamic of satisfaction, not only during resource busts, but also during resource booms.

Suggested Citation

  • Girard, Victoire & Kudebayeva, Alma & Toews, Gerhard, 2020. "Inflated Expectations and Commodity Prices: Evidence from Kazakhstan," GLO Discussion Paper Series 469, Global Labor Organization (GLO).
  • Handle: RePEc:zbw:glodps:469
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    More about this item

    Keywords

    Expectations; Labor Conflict; Oil boom; Resource Curse; Satisfaction;

    JEL classification:

    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
    • N55 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - Asia including Middle East
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • Q34 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Natural Resources and Domestic and International Conflicts

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