Date Added: Dec 2010
The authors analyze how a country's political institutions affect oil production within its borders. They find a pronounced negative relationship between political openness and volatility in oil production, with democratic regimes exhibiting less volatility than more autocratic regimes. This relationship holds across a number of robustness checks including using different measures of political conditions, instrumenting for political conditions and using several measures of production volatility. Political openness also affects other oil market outcomes, including total production as a share of reserves. The findings have implications both for interpreting the role of institutions in explaining differences in macroeconomic development and for understanding world oil markets.