Working Paper: NBER ID: w16614
Authors: Gilbert E. Metcalf; Catherine Wolfram
Abstract: 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.
Keywords: Political Institutions; Oil Production; Economic Outcomes
JEL Codes: Q34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher political openness (D72) | lower volatility in oil production (L71) |
| better political institutions (P16) | higher extraction share (Y60) |
| political institutions (D02) | production volatility (D20) |
| poor political conditions (P39) | more volatile number of active wells (L71) |