Paper #1351

Title:

Oil price shocks, income and democracy

Authors:

Marcus Brückner, Antonio Ciccone and Andrea Tesei

Date:

February 2011

Abstract:

We examine the effect of oil price fluctuations on democratic institutions over the 1960-2007 period. We also exploit the very persistent response of income to oil price fluctuations to study the effect of persistent (oil price-driven) income shocks on democracy. Our results indicate that countries with greater net oil exports over GDP see improvements in democratic institutions following upturns in international oil prices. We estimate that a 1 percentage point increase in per capita GDP growth due to a positive oil price shock increases the Polity democracy score by around 0.2 percentage points on impact and by around 2 percentage points in the long run. The effect on the probability of a democratic transition is around 0.4 percentage points.

Keywords:

Democracy, Oil Price Shocks, Persistent Income Shocks

JEL codes:

P16, O10

Area of Research:

Macroeconomics and International Economics

Published in:

Review of Economics and Statistics, 94 (2), 389-399, 2012

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