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Oil discovery, political institutions and economic diversification

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posted on 2023-06-09, 03:04 authored by Nouf Alsharif, Sambit BhattacharyyaSambit Bhattacharyya
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.

History

Publication status

  • Published

File Version

  • Published version

Publisher

Centre for the Study of African Economies, University of Oxford

Pages

41.0

Place of publication

Oxford, UK

Department affiliated with

  • Economics Publications

Institution

Centre for the Study of African Economies, University of Oxford

Full text available

  • Yes

Legacy Posted Date

2016-09-22

First Open Access (FOA) Date

2016-09-22

First Compliant Deposit (FCD) Date

2016-09-22

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