Oil bonanza and the composition of government expenditure

Keisuke Okada () and Sovannroeun Samreth
Additional contact information
Keisuke Okada: Kansai University

Economics of Governance, 2021, vol. 22, issue 1, No 2, 23-46

Abstract: Abstract Government behavior can be affected by natural resource benefits. Benevolent government and political leaders may use them to improve the welfare of the people, whereas others may use them for their own interests. To examine the effects of oil bonanza on government behavior comprehensively, this study investigates how giant oilfield discoveries affect the size and composition of government expenditure using data from 168 countries between 1972 and 2008. We find weak evidence that giant oilfield discoveries increase total government expenditure significantly in the medium and long term, whereas their effects are more evident in the short term, especially when controlling for other factors affecting total government expenditure. We also obtain evidence that democracy plays a mediating role in these effects; if the democracy level in a country is consolidated, the size of total government spending does not increase even when discovering giant oilfields. Considering each category of government expenditure, giant oilfield discoveries increase expenditure on health and social protection significantly, whereas they decrease educational expenditure. Furthermore, giant oilfield discoveries decrease expenditure on economic affairs and defense and increase general public services and public order and safety. Finally, giant oilfield discoveries increase the net implicit gasoline subsidy in the long term. These findings enhance our understanding of the effects of oil bonanza on government behavior.

Keywords: Resource curse; Petroleum; Government expenditure; Democracy (search for similar items in EconPapers)
JEL-codes: H10 H50 O13 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://link.springer.com/10.1007/s10101-020-00246-3 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
Working Paper: Oil Bonanza and the Composition of Government Expenditure (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:ecogov:v:22:y:2021:i:1:d:10.1007_s10101-020-00246-3

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10101/PS2

DOI: 10.1007/s10101-020-00246-3

Access Statistics for this article

Economics of Governance is currently edited by Amihai Glazer and Marko Koethenbuerger

More articles in Economics of Governance from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().