Oil Wealth and Economic Freedom: Revisiting the Oil Curse from a New Perspective Pubblico

Zhang, Wenye (2015)

Permanent URL: https://etd.library.emory.edu/concern/etds/5m60qs66h?locale=it
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Abstract

Based on two panel datasets of 152 countries and 42 major oil-producing countries respectively, for the time period 1984-2012, this paper confirms that oil wealth and oil dependence undermine economic freedom in countries worldwide. When political risk factors are considered in the regressions, military involvement in governance leads to robustly less free economies across all specifications in both datasets. Within the large dataset, higher political accountability is robustly associated with stronger economic liberation across all measures of oil wealth and oil dependence. Corruption and ethnic tensions only robustly impair countries' economic liberation in a few instances. Considering regional fixed effects, countries in North America enjoy higher degrees of economic freedom whereas countries in all other regions tend to have less economic freedom. Contrastingly, for the 42 major oil producers, political irresponsiveness only robustly impedes economic freedom under a few circumstances. Counterintuitively, higher ethnic tensions are robustly associated with greater economic liberty, which implies that greater ethnic diversity promotes economic activities even though such diversity causes conflicts among different ethnic groups. Corruption's surprisingly significant and positive influence on economic freedom of major oil-producers disappears in robust regressions, which adjust for effects of outliers. Major oil producers in Sub-Saharan Africa, Latin America, and Central Asia statistically significantly lack economic freedom. Religious tensions demonstrate no robust association with economic freedom in either dataset.

Table of Contents

I. Introduction. 1

II. Literature Review.. 4

1. Oil Wealth and Democracy. 4

2. Oil Wealth, Corruption and Civil Conflict. 7

3. Oil Wealth and Economy Development. 9

III. Data and Empirical Framework. 11

1. Data. 11

a. Economic Freedom.... 11

b. Oil Wealth and Dependence.. 11

c. Other Explanatory Variables.. 12

2. Empirical Framework.. 13

IV. Results 14

1. Regressions. 14

2. Comparative Analysis. 17

a. Oil Wealth and Oil Dependence.. 17

b. Political Risk Factors.. 21

3. Robustness Tests. 23

V. Discussion 24

VI. Limitations. 27

VII. Conclusion. 27

Appendix 31

Table 1: Descriptions of Variables. 31

Table 2: Summary Statistics for Regression Models (1) - (18) 33

Table 3: Effect of Oil Wealth & Dependence on Economic Freedom Using EIA Data (Part A) 34

Table 4: Effect of Oil Wealth & Dependence on Economic Freedom Using EIA Data (Part B) 35

Table 5: Effect of Oil Wealth & Dependence on Economic Freedom Using EIA Data (Part C) 37

Table 6: Summary Statistics for Regression Models (19) - (36) 39

Table 7: Effect of Oil Wealth & Dependence on Economic Freedom For 42 Major Oil-Producing Countries (Part A) 40

Figure 1(a): Leverage-versus-Square Residual Diagnostic Plot for Model (12) 50

Figure 1(b): Leverage-versus-Square Residual Diagnostic Plot for Model (16) 50

Figure 1(c): Leverage-versus-Square Residual Diagnostic Plot for Model (18) 51

Figure 2(a): Leverage-versus-Square Residual Diagnostic Plot for Model (30) 52

Figure 2(b): Leverage-versus-Square Residual Diagnostic Plot for Model (32) 52

Figure 2(c): Leverage-versus-Square Residual Diagnostic Plot for Model (36) 53

References 54

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