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

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  • Anca M. Cotet
  • Kevin K. Tsui

Abstract

This paper re-examines the effect of oil wealth on political violence. Using a unique historical panel dataset of oil discoveries, we show that simply controlling for country fixed effects removes the statistical association between the value of oil reserves and civil war onset. Other macro-political violence measures, such as coup attempts, are also uncorrelated with oil wealth. To further address endogeneity concerns, we exploit changes in oil reserves due to randomness in the success of oil explorations. We find little robust evidence that oil discoveries increase the likelihood of political violence. Rather, oil discoveries increase military spending in nondemocratic countries. (JEL D74, H56, O17, Q34, Q41)

Suggested Citation

  • Anca M. Cotet & Kevin K. Tsui, 2013. "Oil and Conflict: What Does the Cross Country Evidence Really Show?," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(1), pages 49-80, January.
    • Handle: RePEc:aea:aejmac:v:5:y:2013:i:1:p:49-80
    Note: DOI: 10.1257/mac.5.1.49
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    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • Q34 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Natural Resources and Domestic and International Conflicts
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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    1. Oil and Conflict: What Does the Cross Country Evidence Really Show? (AEJ:MA 2013) in ReplicationWiki

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