Oil discovery, political institutions and economic diversification

Alsharif, Nouf and Bhattacharyya, Sambit (2016) Oil discovery, political institutions and economic diversification. Working Paper. Centre for the Study of African Economies, University of Oxford, Oxford, UK.

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Abstract

Classical theory predicts that petroleum rich countries would specialise in petroleum products. Yet diversification is touted as a desirable policy objective for petroleum rich nations because it reduces exposure to volatility. Given such theoretical ambiguity, it is important to understand the empirical relationship between petroleum and diversification. In this paper, we test the effect of giant oil discoveries on diversification using a panel dataset covering up to 136 countries and the period 1962 to 2012. After controlling for country and year fixed effects, we find evidence of non-oil export concentration 8 years after a discovery. However, we do not observe any effect on the structure of employment in the non-resource and manufacturing sectors. It appears that democratic political institutions moderate the export concentration effect of petroleum discovery. Countries with weak political institutions experience employment concentration in the non-tradable sector post discovery.

Item Type: Reports and working papers (Working Paper)
Schools and Departments: School of Business, Management and Economics > Economics
Subjects: H Social Sciences > HB Economic theory. Demography > HB0071 Economics as a science. Relation to other subjects
H Social Sciences > HB Economic theory. Demography > HB3711 Business cycles. Economic fluctuations
Depositing User: Sambit Bhattacharyya
Date Deposited: 22 Sep 2016 11:37
Last Modified: 22 Sep 2016 11:55
URI: http://sro.sussex.ac.uk/id/eprint/63527

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