Natural Resources, Democracy, and Labour-Market Outcomes in the Public Sector

Tania Masi and Roberto Ricciuti

No 12973, CESifo Working Paper Series from CESifo

Abstract: Governments in resource-rich countries may use a sizable share of the revenue from their underground wealth to buy support through public employment. This occurs in both democratic governments (which need to be re-elected) and autocratic governments (which have to prevent riots and regime change). Using the Worldwide Bureaucracy Indicators dataset provided by the World Bank, we analyse the effect of natural resources on public employment in developing countries from 2000 to 2018. We find that resource rents may have an effect on public sector characteristics. However, uncovering the heterogeneous effects of different types of natural resources, we find that oil and gas wealth may increase public employment in countries that are not fully democratic, while forest wealth has a positive impact for all values of democracy. At the same time, the public sector wage premium is positively affected by oil and forest in non-democratic countries and by gas when the level of democracy is very high.

Keywords: natural resources; public sector; rentier states; patronage employment (search for similar items in EconPapers)
JEL-codes: C23 N5 O57 P16 (search for similar items in EconPapers)
Date: 2026
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