Oil Price Shocks, Protest and the Shadow Economyː Is there a Mitigation Effect?

Phoebe W. Ishak and Ulrich Fritsche

No 52, WiSo-HH Working Paper Series from University of Hamburg, Faculty of Business, Economics and Social Sciences, WISO Research Laboratory

Abstract: In this paper, we study the impact of exogenous variations of international oil prices on the incidence of protest, while exploring the role of the shadow economy as a mitigating factor. We find that oil price shocks are negatively associated with protests, but the effect is less severe the higher the initial size of the shadow economy. To explain these results, we show that the size of the shadow economy responds counter-cyclically to oil-price-driven income shocks. In particular, we find that the decline in the GDP per capita growth following a negative oil price shock leads to an increase in the size of the shadow economy. This suggest that the shadow economy's capacity to absorb persistent oil price fluctuations without provoking political unrest, should regard it as a mitigation tool rather than an economic burden.

Keywords: Oil Price Shocks; Protest; Shadow Economy; Income (search for similar items in EconPapers)
JEL-codes: D74 O13 O17 Q34 (search for similar items in EconPapers)
Date: 2020
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https://www.econstor.eu/bitstream/10419/260455/1/wp52.pdf (application/pdf)

Related works:
Journal Article: Oil price shocks, protest, and the shadow economy: Is there a mitigation effect? (2022)
Working Paper: Oil price shocks, protest, and the shadow economy: Is there a mitigation effect? (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:uhhwps:52

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