Oil Rent and Income Inequality in Developing Economies: Are They Friends or Foes?

Gaëlle Tatiana Timba, Douzounet Mallaye and Thierry Yogo ()

No 201502, Working Papers from CERDI

Abstract: Using the most recent available data on a sample of 40 developing countries, this paper addresses the effects of oil rent on inequality. Mobilizing a dynamic panel data specification over the period 1996–2008, the econometric results yield two important findings. First, there is a non-linear (U-shaped) relationship between oil rent and inequality. Specifically, oil rent lowers inequality in the short run. This effect then diminishes over time as the oil revenues increase. Our complementary finding is that the fall in income inequality as a result of the increase in the oil rent is fully absorbed by the increase in corruption. Further, the paper examines the channels of causality underlying this relationship. The graphical analysis shows the consistency of the data with the hypothesis according to which corruption, military expenditure, and inflation mediate the effect of oil rent on income inequality.

Keywords: Oil rent; Inequality; Developing countries; Dynamic panel data; Corruption (search for similar items in EconPapers)
JEL-codes: D63 O13 O15 Q32 (search for similar items in EconPapers)
Pages: 23
Date: 2015-01
New Economics Papers: this item is included in nep-ene
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Citations: View citations in EconPapers (10)

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Working Paper: Oil Rent and Income Inequality in Developing Economies: Are They Friends or Foes? (2015)
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