Income inequality and oil resources: Panel evidence from the United States (original) (raw)

Income Inequality and the Oil Resource Curse

Resource and Energy Economics, 2016

Surprisingly, there has been little research conducted about the crosscountry relationship between oil dependence/abundance and income inequality. At the same time, there is some tentative evidence suggesting that oil rich nations tend to under-report data on income inequality, which can potentially influence the estimated empirical relationships between oil richness and income inequality. In this paper we contribute to the literature in a twofold manner. First, we explore in depth the empirical relationship between oil and income inequality by making use of the Standardized World Income Inequality Databasethe most comprehensive dataset on income inequality providing comparable data for the broadest set of country-year observations. Second, this is the first study to our knowledge that adopts an empirical framework to examine whether oil rich nations tend to under-report data on income inequality and the possible implications thereof. We make use of Heckman selection models to validate the tendency of oil rich countries to under-report and correct for the bias that might arise as a result of thiswe find that oil is associated with lower income inequality with the exception of the very oil-rich economies.

On the Quest of Resource blessing: Re-examining the effect of oil on Income Inequality

2015

This paper provides new insights into how oil rent affects income inequality in 52 developed and developing economies over the period 1984-2008. After taking into consideration the endogeneity aspect, the analysis yields three key findings. First, the effect of oil rent on income inequality is non-linear. Oil productivity wealth induces a decline in income inequality for countries for which the share of oil rent in percentage of GDP is below the threshold of 25%. Above this threshold, we document a positive relationship. Second, the effect of oil rent is heterogeneous across countries, depending upon the institutional quality. Specifically, we find that the decline in income inequality is lower in countries with high corruption, low accountability and weak regulatory quality. Finally, we uncover a time-dependent relationship between oil rent and income inequality. In the short run, the effect of oil rent is negative while in the long run, the opposite is observed

Oil rents income inequality and the role of institutions

Mekhraly Shakhbazov

This study examines the relationship between oil rents and income inequality using sample of top 45 oil-producing countries per capita. Constructing a dynamic panel data starting from 1993 to 2016. Regression results sum up to two main findings. First, oil rents positively correlated with income inequality and in multiple model specifications does not have enough significance. Second, corruption magnifies positive correlation of oil rents with income inequality. Furthermore, this paper explores other channels of possible causalities, by implementing graphical and regressive analysis.

Oil Rent and Income Inequality in Developing Economies: Are They Friends or Foes?

2015

Using the most recent available data on a sample of 40 developing countries, this paper addresses the effects of oil rent on inequality. Mobilizing a dynamic panel data specification over the period 1996–2008, the econometric results yield two important findings. First, there is a non-linear (U-shaped) relationship between oil rent and inequality. Specifically, oil rent lowers inequality in the short run. This effect then diminishes over time as the oil revenues increase. Our complementary finding is that the fall in income inequality as a result of the increase in the oil rent is fully absorbed by the increase in corruption. Further, the paper examines the channels of causality underlying this relationship. The graphical analysis shows the consistency of the data with the hypothesis according to which corruption, military expenditure, and inflation mediate the effect of oil rent on income inequality.

Oil trade rents and International Income Inequality

Revista de Economía Mundial, 2021

This paper investigates the role of oil rents as implicit transfers that redistribute global income through international trade channels. It involves estimating these rents, calculating the redistributive effect, exploring the role of exports and imports and the different impact depending on income per capita. The results document that (i) implicit international oil trade rents lead to a positive but declining reduction in international income inequality, although it becomes regressive after 2001 using PPP income estimates; (ii) redistribution is basically generated via exports, with imports playing a minor role; and (iii) international oil rents have a greater impact on the countries in the lowest deciles. The novelty of this work is that, for the first time, the international redistributive effect of oil rents is studied, by introducing the concept of implicit transfers in international trade, which opens up new fields of research in the area of global income inequality.

OIL ABUNDANCE AND ECONOMIC GROWTH: A SIMPLE ANALYSIS OF ECONOMIC TRENDS

While it remains largely undisputed that the abundance of the oil resource will influence economic growth, the perceived ambiguity of the nature of this impact has constituted, in recent times, a source of debate amongst economic theorists. In an attempt to facilitate clarity this investigation therefore sought to explore the economic trends in countries characterised by an over-dependence on oil exports via a cocktail of interpretive, discourse and synthesis analysis while simultaneously utilising graphical tools for comparing these established trends with economic behaviour of countries characterised by a reduced dependence on the oil rents. This analysis proceeded by exploring the theoretical framework for the determinants of economic growth as obtained from literature while establishing correlations that illustrated the relationships between the revenue flow from oil and these economic growth determinants. This investigation was subsequently able to demonstrate a relationship between oil rent dependence and stunted economic growth while establishing that the impact of the oil resource existed within a spectrum of possible outcomes with the actual outcome dependent on the prevailing peculiarities of the existing institutions. Indeed, the implied perverse effect of weak institutions on the eventual outcome of the oil resource impact was firmly established and subsequently associated with the resource curse, which remains a conspicuous theme in modern economic literature. Keywords— Oil rent, Economic growth, Resource curse, Institutions

Geographic oil concentration and economic growth–a panel data analysis

FEP Working Papers, 2009

Given a panel of oil producing countries, we show that a higher oil concentration is associated with an increase in economic growth through capital efficiency in: (i) countries with medium and low income per head from East Asia & Pacific and Latin America & the Caribbean, ...

Oil Resource Abundance, Economic Growth and Income Distribution in Iran

International Conference on Policy Modeling, Ottawa, …, 2009

Since the first oil shock in 1973, almost the economic performance of Iran has been related to its natural resource wealth. The economy has experienced relatively lower per capita GDP growth and higher income inequality. This may support this hypothesis that natural resources seem to have been more of a curse than a blessing for Iran. This paper aims to analyze the effects of oil resource abundance on two major macroeconomic variables, economic growth and income distribution, in Iran using the data over the period 1968-2005. I take a time series perspective and focus on major forces of economic growth including oil resource. Moreover, the main determinants of income distribution are theoretically specified to examine the effects of oil resource. Due to the problem of data availability, and ARDL approach is employed to estimate the empirical models. Using the production function approach, the results of the study confirm that the overall long run effect of oil abundance on GDP is positive and significant but the value of the estimated coefficient is too small. The findings show that physical capital and human capital have positive and significant effects on GDP in the long run. Moreover, this study finds that oil abundance have negative and significant effect on income distribution. It means that oil revenue improves income equality in Iran. It should be point out that while the Gini coefficient is relatively higher compared to most countries, poverty level are substantially lower because of the distinguished social welfare system in the country and cohesive system of private social responsibility through a religious charitable system. However, income and human capital have a negative and significant effect on income distribution. The overall findings appeared to support this hypothesis that oil abundance is not a blessing for Iran.

Refining the Oil Curse: Country-Level Evidence from Exogenous Variations in Resource Income

Comparative Political Studies

Is there a resource curse? One school of scholars argues that resource income is associated with slower transitions to democracy; others contend that the negative effects of resources are conditional on factors such as institutional quality. To test these competing hypotheses, this article exploits the price spike caused by the 1973 oil embargo, which transformed several countries with latent oil industries into resource-reliant states. Our quasi-experimental research design allows for better identification of causation than the associational approaches common in the literature. We use the method of synthetic controls to compare the political development of states that received resource-derived revenue with how these states would have behaved in a counterfactual world without such revenue. We find that there is little evidence that a resource curse systematically prevents democratization or that institutional quality alone determines outcomes. Nevertheless, resource income meaningfully affects outcomes and even contributes to democratization in some instances.