More on Natural Resources and Democracy  
Tuesday, June 4, 2013
Daron Acemoglu and James Robinson

In our last post, we discussed the relationship between natural resource wealth and democracy. We mentioned earlier research by Michael Ross, which suggested that natural resources retarded or perhaps prevented the emergence of democracies. We also showcased more recent research by Stephen Haber and Victor Menaldo who focused on within-country, over-time variation, instead of the cross-country focus of Michael Ross’s early research. These authors challenge the earlier findings and report results suggesting that there is no negative effect of natural resource and oil wealth on democracy.

Michael Ross, however, has pointed us to his new work with Jorgen Andersen, challenging Haber and Menaldo’s findings, which those interested in this area, and particularly on factors retarding the emergence of democracy in the Middle East, should look at. Andersen and Ross argue that even with country fixed effects, there is a negative effect of oil wealth on democracy, but to see this one needs to interact oil wealth with the post-1980 dummy (partly because the role of oil has changed quite a bit after to oil price hikes of this era). So the debate continues, and there probably is more to uncover in this area — we suspect especially in the more detailed interaction between specific aspects of institutions and the role of natural resource wealth as we will discuss next.

Article originally appeared on Why Nations Fail by Daron Acemoglu and James Robinson (http://whynationsfail.com/).
See website for complete article licensing information.