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  3. American Economic Journal: Macroeconomics
  4. January 2013
  5. Oil and Conflict: What Does the Cross Country Evidence Really Show?

Oil and Conflict: What Does the Cross Country Evidence Really Show?

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Abstract

This paper re-examines the effect of oil wealth on political violence. Using a unique historical panel dataset of oil discoveries, we show that simply controlling for country fixed effects removes the statistical association between the value of oil reserves and civil war onset. Other macro-political violence measures, such as coup attempts, are also uncorrelated with oil wealth. To further address endogeneity concerns, we exploit changes in oil reserves due to randomness in the success of oil explorations. We find little robust evidence that oil discoveries increase the likelihood of political violence. Rather, oil discoveries increase military spending in nondemocratic countries. (JEL D74, H56, O17, Q34, Q41)

Citation

Cotet, Anca M., and Kevin K. Tsui. 2013. "Oil and Conflict: What Does the Cross Country Evidence Really Show?" American Economic Journal: Macroeconomics, 5 (1): 49-80. DOI: 10.1257/mac.5.1.49

Additional Materials

JEL Classification

  • D74 Conflict; Conflict Resolution; Alliances
  • H56 National Security and War
  • O17 Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
  • Q34 Natural Resources and Domestic and International Conflicts
  • Q41 Energy: Demand and Supply
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