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Oil Discoveries and Protectionism

Frederick (Rick) van der Ploeg (), Fidel Perez-Sebastian and Ohad Raveh ()
Authors registered in the RePEc Author Service: Fidel Perez Sebastian ()

No 895, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: Can oil discovery shocks affect the demand for protectionism? A two-period model of Dutch disease indicates that if the tradable sector is politically dominant then an oil discovery induces protectionism. If the economy is also credit constrained, this effect is intensified upon discovery, but partially reversed when oil revenues start to flow. We test these predictions using detailed bilateral tariff data that cover 96 products in 155 countries over the period 1988-2012, and worldwide discoveries of giant oil and gas fields. Our identification strategy rests on the exogeneity of the timing of discoveries. We find that an oil discovery increases tariffs during pre-production years and decreases tariffs in the years to follow yet to a lesser extent, most notably in capital scarce economies with a relatively dominant tradable sector. Our baseline estimates indicate that a giant oil field discovery induces a rise of approximately 15% in the average tariff over the course of 10 years; this increase is about 1.8 times larger during the pre¬production period when the oil discovery represents a pure news shock.

Keywords: Oil discoveries; protectionism; capital scarcity; Dutch disease; political economy; trade policy; news shocks (search for similar items in EconPapers)
JEL-codes: F13 O24 Q32 (search for similar items in EconPapers)
Date: 2019-12-19
New Economics Papers: this item is included in nep-ene, nep-opm and nep-pol
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