Media Briefings

More Oil, Less Democracy: Evidence From Worldwide Crude Oil Discoveries

  • Published Date: March 2011


The more valuable the oil resources of a non-democratic country, the less likely it is to
become democratic. That is the key conclusion of research by Professor Kevin Tsui,
whose work sheds light on the democratic prospects of the countries of the Middle East and
North Africa.
His study, which is published in the March 2011 issue of the Economic Journal, uses
detailed industrial data on the history of worldwide oil discoveries to provide new evidence
on the long-term effect of oil wealth on democracy. Among the main findings:
 Larger oil discoveries lead to slower transitions to democracy, such as moving from
rigged to fair elections, allowing free speech, etc.
 The negative effect of oil on democracy is larger the higher the oil quality and the
lower the costs of oil exploration and extraction.
 The discovery of oil has essentially no political impact in countries that are already
democratic, such as Norway.
 At least until recent events in the Middle East, oil-rich non-democratic countries do
not experience more civil conflict. Rather, oil-rich non-democratic countries spend
significantly more on military.
 As seen now in Libya and elsewhere, lucrative oil reserves provide strong
incentives for greedy dictators to remain in power – and they use fear to deter their
political opponents.
Many people believe that natural resource wealth is a social curse. For example, oil wealth
is said to enhance the durability of bad authoritarian regimes because it enables dictators to
become stronger by funding patronage. But, Professor Tsui asks:
‘How do we reconcile the co-existence of some oil-rich non-democratic regimes,
such as Saudi Arabia’s royal family, and some of the most democratic countries like
Norway, where the Norwegian Oil Fund is used to fuel the economy?
‘My answer is: both geology and history matter!’
While oil exploration and extraction activities extend over time, the data suggest that a
country’s major discoveries are usually concentrated in a few years, known as the peak
discovery period. For example, while many oil-rich countries in the Middle East had a peak
discovery year prior to 1950, Norway’s peak discovery year was 1979.
By comparing the long-term change in democracy in countries before and after their peak
discovery years, the analysis shows that larger oil discoveries lead to slower transitions to
democracy.
Professor Tsui estimates that, on average, when non-democratic countries discover 100
billion barrels of oil (approximately the oil endowment of Iraq), it pushes their democracy
score about 15 percentage points below trend three decades after the discovery. As a point
of reference, Bahrain is about 15 percentage points more democratic than Saudi Arabia. So
the estimated effect appears to be modest.
But taking account of geological factors – such as oil quality, oilfield depth and other
indicators of the costs of extraction – the negative effect of oil on democracy almost
doubles. A difference of 30 percentage points in democracy is approximately the difference
between Jordan and Saudi Arabia.
Moreover, the negative effect of oil is larger the higher the oil quality and the lower the
exploration and extraction costs. Norway is a relatively high-cost oil-producing country
because of the technological challenge involved in extracting North Sea oil. But in addition,
since history also matters, Norway remains one of the most democratic countries in the
world.
Indeed, another major finding of this research is that oil discovery has essentially no
political impact in democratic countries. Norway has been a democratic country since the
beginning of the twentieth century. More than 70 years of democratic experience made
Norway a consolidated democracy when oil was discovered in the 1970s – and Norway has
not become less democratic since then.
Before the 1950s, Egypt was one of the relatively more democratic countries in the Middle
East and North Africa region. Its limited oil discoveries peaked in 1965 and oil production in
Egypt has been declining since the mid-1990s. Tunisia has a similar oil history. The findings
of this research suggest that the recent political events in these two countries may not be
coincidences.
Professor Tsui comments:
‘Oil wealth can be a political curse when oil-rich dictators oppose democratic
development because they will have more to give up from losing power.
‘But my study highlights the importance of the possibility of heterogeneous effects
when evaluating the social impact of resource wealth.’
Extending the analysis in a study with Professor Anca Cotet from Ball State University,
Professor Tsui finds that oil-rich non-democratic countries do not experience more civil
conflict. Rather, oil-rich non-democratic countries spend significantly more on the military.
In terms of the mechanism, in research with Professor Casey Mulligan from the University
of Chicago, Professor Tsui argues that lucrative oil reserves provide strong incentives for
greedy dictators to remain in power – and they use fear to deter their greedy political
opponents.
ENDS
Notes for editors: ‘More Oil, Less Democracy: Evidence from Worldwide Crude Oil
Discoveries’ by Kevin Tsui is published in the March 2011 issue of the Economic Journal.
Kevin Tsui is at Clemson University in South Carolina.
For further information: contact Kevin Tsui on +1-864-656-3953 (email:
ktsui316@gmail.com); or Romesh Vaitilingam on +44-7768-661095 (email:
romesh@vaitilingam.com).