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

Traviss Cassidy

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Resource curse; democracy; conflict; fiscal capacity (search for similar items in EconPapers)
JEL-codes: O11 O13 Q32 Q35 (search for similar items in EconPapers)
Date: 2015-12-01, Revised 2018-08-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Published in The Economic Journal 623.129(2019): pp. 2745-2778

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