Oil Rents, Corruption, and State Stability

We examine the effects of oil rents on corruption and state stability exploiting the exogenous within-country variation of a new measure of oil rents for a panel of 31 oil-exporting countries during the period 1992 to 2005. We find that an increase in oil rents significantly increases corruption, significantly deteriorates political rights while at the same time leading to a significant improvement in civil liberties. We argue that these findings can be explained by the political elite having an incentive to extend civil liberties but reduce political rights in the presence of oil windfalls to evade redistribution and conflict. We support our argument documenting that there is a significant effect of oil rents on corruption in countries with a high share of state participation in oil production while no such link exists in countries where state participation in oil production is low.Corruption;Economic models;Fiscal transparency;Governance;Oil exporting countries;Oil production;Oil revenues;political rights, civil liberties, civil conflict, civil war, political economy, freedom house, political science, political institutions, ethnic fractionalization, journal of conflict resolution, state conflict, political risk, distributional conflict, violent conflict, violent means, political systems, political participation, civil conflicts, political aspects, individual rights, ethnic group, political power, economic foundations of conflict theory, freedom of expression, rebel groups