The Long-Run Effects of Oil Wealth on Development: Evidence from Petroleum Geology

Cassidy, Traviss (2015): The Long-Run Effects of Oil Wealth on Development: Evidence from Petroleum Geology. Published in: The Economic Journal , Vol. 129, No. 623 (1 October 2019): pp. 2745-2778.

Abstract

We estimate the long-run effects of oil wealth on development by exploiting spatial variation in sedimentary basins—areas where petroleum can potentially form. Instrumental variables estimates indicate that oil production impedes democracy and fiscal capacity development, increases corruption, and raises GDP per capita without significantly harming the non-resource sectors of the economy. We find no evidence that oil production increases internal armed conflict, coup attempts, or political purges. In several specifications failure to account for endogeneity leads to substantial underestimation of the adverse effects of oil, suggesting that countries with higher-quality political institutions and greater fiscal capacity disproportionately select into oil production.

• Item Type: MPRA Paper
• Language: English
• Keywords: Resource curse, democracy, conflict, fiscal capacity
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O13 - Agriculture ; Natural Resources ; Energy ; Environment ; Other Primary Products; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation > Q32 - Exhaustible Resources and Economic Development; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation > Q35 - Hydrocarbon Resources

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