Cursed Resources? Political Conditions and Oil Market Outcomes
We analyze how a country's political institutions affect oil production within its borders. We find a pronounced negative relationship between political openness and volatility in oil production, with democratic regimes exhibiting less volatility than more autocratic regimes. This relationship holds across a number of robustness checks including using different measures of political conditions, instrumenting for political conditions and using several measures of production volatility. Political openness also affects other oil market outcomes, including total production as a share of reserves. Our findings have implications both for interpreting the role of institutions in explaining differences in macroeconomic development and for understanding world oil markets.
We are grateful to Carla Peterman for extraordinary research assistance and to Daron Acemoglu, Arthur van Bentham, Ryan Kellogg, Lutz Kilian, Richard Schmalensee, Enrico Spolaore and seminar participants at the University of Chicago Harris School, Columbia University, University of California Berkeley, Duke University and University of Michigan for helpful comments. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Gilbert E. Metcalf and Catherine Wolfram, 2015. "Cursed Resources? Political Conditions and Oil Market Outcomes," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3). citation courtesy of