Revisiting the oil and democracy nexus : New evidence utilizing V-DEM democracy data in a GMM PVAR framework

This study re-examines the validity of oil-hinders-democracy hypothesis by comparing the long-term effects of oil abundance and oil dependence democracies individually. Based on five novel measures of democracy from V-DEM dataset, we test this hypothesis on data from 95 developing countries over the period 1932–2014. Our analyses show some nuances in the oil-democracy relationship. First, that oil wealth adversely affects democracy across the full sample. Second, once we ?classified developing countries into five sub-samples, we consistently ??nd that the influence of oil wealth (abundance/dependence) measures on democracy varies across geographical regions? as well as small and large-scale oil endowment countries. Third, we find that institutional quality in the form of rule of law plays a crucial role in altering the oil–democracy link. Overall, we provide ample support for ‘Conditionalist view’. In other words, oil has different effects on democracy in the context of oil abundancy, geographic regions, and institutional aspects. More importantly, it seems that oil abundance does not hinder democracy in each of the five sub-samples and in some instances can even be a blessing. Thus, it is worthy to make a distinction between these two types of oil wealth to better understand the oil-democracy relationship.