Munich Personal RePEc Archive

Oil rents and institutional quality: empirical evidence from Algeria

Chekouri, Sidi Mohamed and Benbouziane, Mohamed and Chibi, Abderrahim (2017): Oil rents and institutional quality: empirical evidence from Algeria. Published in: Topics in Middle Eastern and African Economies , Vol. Vol. 1, No. Issue No. 2, Septembre 2017 (September 2017): pp. 1-31.

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This paper examines the interaction between natural resource abundance and institutional quality in Algeria, using two measures of institutional quality (corruption and democratic accountability), and a measures for resource endowment (oil rents as a percentage of GDP). Our results indicate that an increase in oil rents significantly increase corruption in Algeria, while the interaction effect between oil rents and democratic accountability is positive and statistically significant, which means that enhancing democratic institutions can reduce corruption. It is also revealed that the manufactures exports significantly decline in the aftermath of oil rents shock, a pattern consistent with the Dutch Disease phenomenon. On the one hand, these findings confirms that Algeria’s institutional framework demonstrates a high degree of perceived weakness, and on the other hand, enhancing these institutional environment would reduce corruption, and increase the impact of resource abundance on economic development.

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