Aug 6, 2014

Giant oilfield discoveries and internal armed conflicts

From a paper by Yu-Hsiang Lei and Guy Michaels
We use new data to examine the effects of giant oilfield discoveries around the world since 1946. On average, these discoveries increase per capita oil production and oil exports by up to 50%. But these giant oilfield discoveries also have a dark side: they increase the incidence of internal armed conflict by about 5–8 percentage points. This increased incidence of conflict due to giant oilfield discoveries is especially high for countries that had already experienced armed conflicts or coups in the decade prior to discovery. 
. . . To qualify as a giant (and thus be included in the dataset), an oilfield must have contained ultimate recoverable reserves (URR) of at least 500 million barrels of oil equivalent (MMOBE) before any oil was extracted. p. 10 (see a draft below).
The intuition behind the model is in page 1
In this model, giant oilfield discoveries increase oil revenues, generating windfall income for the incumbent. When the incumbent cannot credibly commit to share this windfall, the opposition may mobilize to challenge him, and this may lead to an internal armed conflict. Such conflicts over resources are especially likely in countries where political violence tends to translate into political and economic gains. 
A draft.  

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