Oil Wealth and Property Rights

We investigate the role of oil wealth in economic institutions for a sample of 150 countries between 1960 and 2014. We find that higher levels of oil wealth result in weak economic institutions in the form of low levels of private property rights protection. This result is robust to alternative instrumental-variable approaches as well as different operationalizations of oil wealth and economic institutions. We argue that our finding is indicative of oil interest groups using their economic power to achieve weaker property rights to curtail innovation and competition which are anathema to the mature and monopolistic or oligopolistic oil sector. Indeed, we also provide evidence that oil wealth induces clientelism, corruption and the repression of dissenting political voices. We argue that oil interest groups translate their outsized economic into political power through these transmission channels to enforce lower levels of property rights protection