Embed Size (px)
Citation preview
Does Oil Wealth Affect Democracy in Africa?
John C. Anyanwu and Andrew E. O. Erhijakpor
No 184 – November 2013
Correct citation: Anyanwu, John C. and Erhijakpor, Andrew E. O. (2013), Does Oil Wealth Affect Democracy In
Africa?, Working Paper Series N° 184, African Development Bank, Tunis, Tunisia.
Steve Kayizzi-Mugerwa (Chair)
Anyanwu, John C.
Faye, Issa
Ngaruko, Floribert
Shimeles, Abebe
Salami, Adeleke
Verdier-Chouchane, Audrey
Coordinator
Working Papers are available online at
http:/www.afdb.org/
Copyright © 2013
African Development Bank
Angle de l’avenue du Ghana et des rues Pierre de
Coubertin et Hédi Nouira
BP 323 -1002 TUNIS Belvédère (Tunisia)
Tel: +216 71 333 511
Fax: +216 71 351 933
E-mail: [email protected]
Salami, Adeleke
Editorial Committee Rights and Permissions
All rights reserved.
The text and data in this publication may be
reproduced as long as the source is cited.
Reproduction for commercial purposes is
forbidden.
The Working Paper Series (WPS) is produced by
the Development Research Department of the
African Development Bank. The WPS disseminates
the findings of work in progress, preliminary
research results, and development experience and
lessons, to encourage the exchange of ideas and
innovative thinking among researchers,
development practitioners, policy makers, and
donors. The findings, interpretations, and
conclusions expressed in the Bank’s WPS are
entirely those of the author(s) and do not
necessarily represent the view of the African
Development Bank, its Board of Directors, or the
countries they represent.
Does Oil Wealth Affect Democracy in Africa?
John C. Anyanwu and Andrew E. O. Erhijakpor1
1 John C. Anyanwu and Andrew E. O. Erhijakpor are respectively Lead Research Economist at the
Development Research Department, AfDB and Lecturer, Department of Accounting, Banking and
Finance Delta State University, Asaba, Nigeria.
AFRICAN DEVELOPMENT BANK GROUP
Working Paper No. 184
November 2013
Office of the Chief Economist
ABSTRACT
Understanding the effect of oil wealth on
democracy is important. National
democratic institutions provide a check on
governmental power and thereby limit the
potential of public officials to amass
personal wealth and to carry out unpopular
policies. Democracy promotion has thus
been at the top of the US and West
European foreign policy agenda since the
end of the Cold War. Recently rising coups
d’états attempts and oil discoveries in some
African countries, high energy prices and
the North African and Middle East situation
characterized by revolutions have made the
question of the link between oil wealth and
democracy timelier than ever. This paper
uses recent data on historical oil wealth to
provide new evidence on the effect of oil
wealth on democracy in Africa from 1955 to
2008. We find that oil wealth is statistically
associated with a lower likelihood of
democratization when we estimate the
relationship in a pooled cross-sectional and
time-series setting. In addition, when
estimated using fixed effects, the strong
negative statistical association continues to
hold. Indeed, this result is robust to the
source of oil wealth data, the choice and
treatment of the variables set, and the
sample selection. Our results also show
other interesting and important results. The
cross-country evidence examined in the
study confirms that the
“Lipset/Aristotle/modernization hypothesis”
(that prosperity stimulates democracy) is a
strong empirical regularity. Also, the
propensity for democracy rises with
population size, population density, ethnic
fractionalization, having British legal origin
or colonial heritage, and having a
supportive institutional environment in the
form of maintenance of the rule of law.
However, apart from oil wealth, democracy
tends to fall with linguistic fractionalization
and rough (mountainous) terrain.
Moreover, consistent with the data, North
Africa consistently fails to favor democratic
development.
JEL: D72, L71, J15, O17, O55, Q32
Keywords: Oil wealth, resource curse, democracy, Africa.
5
1. Introduction
Oil wealth can be a political curse when oil-rich dictators oppose democratic development because they
will have more to give up from losing power. In Africa, many of the poorest and most troubled states
have, paradoxically, high levels of natural resource wealth. Most of these countries are oil producers
and have become what the literature calls "rentier states," because a great portion of their national
wealth comes from the export of oil and a few political elite collects the revenues from the oil export
and use the money for cementing their political, economic and social power by controlling government
and its bureaucracy. Thus, there is a growing body of evidence that resource wealth itself may harm a
country's prospects for democracy. Oil is not the main reason for the lack of democracy in resource-
rich states in Africa. Many factors – economic, cultural and political tradition, religion, geography,
colonial past and others - impede development of democracy and democratic institutions. While it is
clear that democracy is always a result of these different factors, it is interesting to find out how
important the abundance of oil wealth is for democratic development in Africa.
Understanding the effect of oil wealth and democracy is important. Democratic institutions provide a
check on governmental power and thereby limit the potential of public officials to amass personal
wealth and to carry out unpopular policies. Democracy promotion has thus been at the top of the US
and West European foreign policy agenda since the end of the Cold War. Recently rising coups
attempts in some African countries, high energy prices and the North African and Middle East situation
characterized by revolutions have made the question of the link between oil wealth and democracy
timelier than ever. Indeed, the recent wave of “revolutions” and “counter revolutionary” attempts in
North Africa and the Middle East has not only been important political events, they have also re-
sparked old academic debates on democracy and oil wealth.
In addition, less than half of the world population is living under total or partial democracies. But in
Africa, only nine of the 53 countries are at best flawed democracies while 31 of them are authoritarian
regimes. Because democratic institutions, which provide checks and balances on elected officials, are
prone to reduce corruption (see, for example, Bhattacharyya and Haodler, 2010), improving political
institutions may be an effective tool in the global fight against corruption in developing countries.
This paper uses recent data on historical oil explorations, discoveries and extraction to provide new
evidence on the effect of oil wealth on democracy in Africa from 1955 to 2008. The dependent variable
“democracy” is taken from the Polity IV dataset. It contains coded annual information on regime and
authority characteristics for all independent states (with greater than 500,000 total population) in the
world. It is calculated from the polity2 index as a measure of democracy, normalized it to a 0–1 scale,
with 1 being the most democratic. This variable is a composite indicator constructed to reflect the
competitiveness and openness of political executive recruitment, constraints on the chief executive, and
the regulation and competitiveness of political participation.
Thus, the further contents of the paper can therefore be adumbrated as follows. Section II presents some
stylized facts on oil reserves and democratic development in recent years while Section III examines a
brief literature review. Section IV presents the model and descriptive statistics while Section V presents
and discusses the empirical estimates. Section VI concludes the paper with policy implications.
6
2. Stylized Facts On Oil Reserves And Democratic Development
2.1. Trend in Oil Reserves
Global oil reserves were estimated to have reached 1669 trillion barrels in 2012 from 1238 trillion
barrels in 1980. As Figure 1 shows, the Middle East continues to dominate global oil reserves, recently
followed by South and Central America.
Source: Authors, using data from BP Statistical Review of World Energy 2013
Africa’s share of global oil reserves in 2012 was roughly 8%, with the Middle East dominating at over
48% (see Figure 2).
-
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
900.0
2007 2008 2009 2010 2011 2012
Figure 1: Proved Crude Oil Reserves by World Regions, 2007-2012 (Trillion Barrels)
North America South & Central America Europe & Eurasia
Middle East Africa Asia Pacific
7
Source: Authors, using data from BP Statistical Review of World Energy 2013
Africa’s oil reserves have maintained an upward trend, rising from 53.4 trillion barrels in 1980 to over
130 trillion barrels in 2012 (Figure 3).
Source: Authors, using data from BP Statistical Review of World Energy 2013
By 2012, Libya controlled more than a third of Africa’s oil reserves (Figure 4), followed by Nigeria
that controlled over a quarter.
13.2
19.7
8.4 48.4
7.8
2.5
Figure 2: Percentage (%) of Proved Crude Oil Reserves by World Regions, 2012
North America South & Central America Europe & Eurasia
Middle East Africa Asia Pacific
-
20.0
40.0
60.0
80.0
100.0
120.0
140.0
Figure 3: Africa: Trend in Proved Oil Reserves (Trillion Barrels), 1980-2012
Africa
8
Source: Authors, using data from BP Statistical Review of World Energy 2013
2.2. Trend in Democratic Development
As Sorensen (1993) puts it, democracy focuses on political arrangements and participation, that is,
institutions and processes that guarantee the rights and freedoms to choose and replace leaders through
regular and free elections, equality of opportunity and access, and a just distribution of social benefits
and burdens are maintained.
Democracy can be generally conceptualized in two ways: electoral democracy and liberal democracy.
With the former conceptualization, a country is democratic if there are free and open elections. With
respect to the second conceptualization, a democracy is seen through political freedom (in elections,
transparency of the government and political participation) and civil liberties (freedom of speech, union
rights and rule of law). It is not surprising that this form is characterized as a more substantial type of
democracy. This is because in a liberal democracy, elected officials have power as well as authority,
and the military and police are subordinate to them. The rule of law is upheld by an independent and
respected judiciary. As a result, citizens have political and legal equality, state officials are themselves
subject to the law, and individual and group liberties are respected. People are free to organize,
demonstrate, publish, petition, and speak their minds. Print and electronic media are free to report and
comment, and to expose wrongdoing. Minority groups can practice their culture, their faith, and their
beliefs without fear of victimization. Executive power is constrained by other governmental actors.
0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00
Tunisia
Chad
Sudan
Rep. of Congo (Brazzaville)
Equatorial Guinea
Gabon
South Sudan
Other Africa
Egypt
Algeria
Angola
Nigeria
Libya
0.33
1.15
1.15
1.23
1.31
1.53
2.69
2.83
3.30
9.36
9.72
28.55
36.85
Figure 4: Africa: % Share of Africa's Oil Reserves in 2012 by Major Countries
9
Property rights are protected by law and by the courts. In addition, corruption is punished and deterred
by autonomous, effective means of monitoring and enforcement (Diamond, 1999).
The world is in the fourth decade since the great wave of global democratic expansion began in 1974.
The number of democracies has increased—from about 40 in 1974 to around 120 in 2012, slightly
over 60 percent of all independent states. The upward trend in democracy holds true for both electoral
democracies and liberal democracies. While electoral democracies have doubled from 30% in 1974 to
61% in 2012, liberal democracies have increased from about 22% to 42% during the same period
(Figure 5).
Source: Authors, using data from Diamond (2012a) and Freedom House (2013)
By region, the Euro/Anglo areas continue to dominate in both electoral and liberal democracy at 100%,
with Sub-Saharan Africa languishing at just 14% of liberal democracy and 37% of electoral
democracy. The Middle East and North Africa (MENA) performed worst in both categories (Figure 6).
A similar pattern emerges when democracy is calculated as index (Figure 7).
0
10
20
30
40
50
60
70
Figure 5: The Global Expansion of Democracy (Percentages of Electoral and Liberal Democracies), 1974-2012
Electoral Democracy Liberal Democracy
10
Source: Authors, using data from Diamond (2012b)
Source: Authors, using data from EIU (2013)
Although almost one-half of the world’s population lives in a democracy of some sort, only 11% reside
in “full democracies”, representing just 15% of all the countries in the world. More than 37% of the
people in the world still lives under authoritarian rule (Figure 8).
0 20 40 60 80 100 120
Middle East & North Africa
Sub-Saharan Africa
Asia
Eastern Europe & Former Soviet Union
Pacific Islands
Latin America & the Caribbean
Euro/Anglo
Figure 6: Democracy by Region, 2012 (% of Total)
Liberal Democracy Electoral Democracy
0 2 4 6 8 10
Middle East & North Africa
Sub-Saharan Africa
Asia & Australasia
Eastern Europe
Latin America & the Caribbean
Western Europe
North America
Figure 7: Democracy Index in 2012 by Region (%)
11
Source: Authors, using data from EIU (2013)
In addition, while democracy has expanded since 1974, there has been a rising tide of democratic
breakdowns or “democratic recession” since 1999. Of the 54 democratic breakdowns or reversals since
1974, nearly half (26) of them have occurred since 1999 (Diamond, 2013). They include some
countries in Africa such as Nigeria, Kenya, and Egypt. Indeed, between 1974 and 2011, there had been
a 32% of democratic breakdowns globally against 16% between 1974 and 1985; 12% between 1986
and 1998, and 20% between 1999 and 2011 (Figure 9).
Source: Authors, using data from Diamond (2012b)
Interestingly too, the Polity IV Project has rated the levels of both democracy and autocracy for each
country and year using coded information on the general qualities of political institutions and
0 5 10 15 20 25 30 35 40
Full Democracies
Flawed Democracies
Hybrid Regimes
Authoritarian Regimes
15
32.3
22.2
30.5
11.3
37.2
14.1
37.1
Figure 8: Democracy Index by Regime Type, 2012 (%)
% of World Population % of Countries
0%
5%
10%
15%
20%
25%
30%
35%
1974-1985 1986-1998 1999-2011 1974-2011
16%
11.72%
19.86%
31.95%
Figure 9: Rate of Democratic Breakdowns, 1974-2011 (%)
12
processes, including executive recruitment, constraints on executive action, and political competition.
These ratings have been combined into a single, scaled measure of regime governance: the Polity score,
which ranges from -10, fully institutionalized autocracy, to +10, fully institutionalized democracy. A
perfect +10 or democracy, has institutionalized procedures for open, competitive, and deliberative
political participation; chooses and replaces chief executives in open, competitive elections; and
imposes substantial checks and balances on the discretionary powers of the chief executive. On the
other hand, in a perfect -10 or autocracy, citizens participation is sharply restricted or suppressed; chief
executives are selected according to clearly defined (usually hereditary) rules of succession from within
the established political elite; and, once in office, chief executives exercise power with no meaningful
checks from legislative, judicial, or civil society institutions. Countries with Polity scores from +6 to
+10 are counted as democracies while those with Polity scores from -10 to -6 are counted as
autocracies. The middling category refers to “Anocracies”, which are characterized by institutions and
political elites that are far less capable of performing fundamental tasks and ensuring their own
continuity. Anocratic regimes very often reflect inherent qualities of instability or ineffectiveness and
are especially vulnerable to the onset of new political instability events, such as outbreaks of armed
conflict, unexpected changes in leadership, or adverse regime changes through military coups or other
violent means. Anocracies are countries whose governments are neither fully democratic nor fully
autocratic but, rather, combine an, often, incoherent mix of democratic and autocratic traits and
practices. Polity scores for anocracies range from -5 to +5 (Marshall. and Cole, 2011).
As Figure 10 shows, taken together, the world was essentially non-democratic till 1990; for Sub-
Saharan Africa it was till 1999 but North Africa has remained undemocratic. However the shift, which
has been most dramatic since the early 1980s was essentially from “autocratic” to "anocratic" regimes,
especially in the poorer countries of Africa. Indeed, autocracies persist in most war-torn countries and
in oil-producing nations. Indeed, between 1960 and 2012, the global average polity score was just 0.39
compared with -2.80 for the whole of Africa, -2.39 for Sub-Saharan Africa, and -6.26 for North Africa
and hence being mired in what Brumberg (2002) called “the trap in liberalized autocracy”.
13
Source: Authors, using data from PolityIV Project Online (2013)
With respect to Africa, from the early 1990s, the Continent experienced a "second liberation" that
opened up new prospects for democratic development on the Continent. Most countries legalized
opposition parties and held competitive, multiparty elections, which, though, have often not met the
minimal democratic criteria of freeness and fairness. They have therefore been qualified as "pseudo-
democracies" or “virtual democracies” (Joseph, 1999).
However, the recent crises of military coups in Central African Republic (2013), Mali (2012) (in spite
of recent presidential elections), Guinea Bissau (2012) and Niger (2010); the continued escalation of
political crises in Libya, Tunisia, and Egypt after the “Arab Spring coup d’états” in those countries; the
disputed presidential elections in the Democratic Republic of Congo and Zimbabwe, the
unconstitutional third term candidacy of some African leaders; the 2007 post-electoral violence in
Kenya; and the emergence of violent Islamist groups, are disturbing developments that posit a profound
institutional crisis of democracy and contributing to a trend that threatens the blossoming of democracy
across Africa.
3. The Brief Review Of The Literature
One of the natural “resource curse” arguments in the literature is that oil-rich countries tend to adopt
less democratic ways of governance. Ross (2001, 2008) argues that there are three mechanisms that ties
oil wealth to authoritarianism: a “rentier effect” (‘taxation effect” and “spending effect”, through which
governments use low tax rates and high spending to dampen pressures for democracy; a “repression
effect”, by which governments build up their internal security forces; and a “modernization effect”, in
which the failure of the population to undergo certain social changes renders them less likely to push
-10.00
-8.00
-6.00
-4.00
-2.00
0.00
2.00
4.00
6.001
96
0
19
62
19
64
19
66
19
68
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
Figure 10: Trend in Politiy2: Some Comparative View, 1960-2012
Africa Sub-Saharan Africa North Africa World
14
for democracy. More recently, others have suggested alternative mechanisms: Fish (2005) faults
corruption; Box (2003) points to asset specificity; and others emphasize international factors.
The “taxation effect” suggests that when governments derive sufficient revenues from oil, they are
likely to tax their populations less heavily. In turn, the population will be less likely to demand
accountability from, and representation in, the government. The argument on the “spending effect” is
that oil wealth may lead to greater spending on patronage, which dampens latent pressures for
democratization. Citizens in oil-rich states may want democracy as much as citizens elsewhere, but oil
wealth may allow their governments to spend more on internal security and militarization and so block
the populations democratic aspirations, sometimes resulting in "rentier absolutist states". As Cotet and
Tsui (2011) show, oil-rich non-democratic countries have significantly higher military expenditures.
According to the “modernization effect” or the “group formation effect”, the government will use the
oil largesse to prevent the formation of social groups which are independent from the state and hence
which may be inclined to demand political rights from the government. In the latter case, oil inhibits
democratization by retarding certain social changes that tend to produce more accountable government.
The modernization argument draws on the work of earlier scholars – most importantly Inglehart
(1997), but also Lipset (1959) and Deutsch (1961) – who suggest that democratization comes about
when a society is transformed by higher education levels, urbanization, the development of modern
communications, and greater occupational specialization. If oil wealth inhibits these social changes, it
could also impede the democratization process.
Fish (2005) also argues that corruption can help explain the connection between oil wealth and the
absence of political freedom. Massive official malfeasance reduces popular demand for democracy but
also undermines elites’ interest in democracy: the more corrupt the public official, the greater his or her
interest in avoiding public scrutiny and thwarting popular control of politics. While oil wealth
strengthens authoritarian regimes through a domestic mechanism, perhaps foreign influence also plays
a role. It is argued that that oil-rich governments are less accountable to their citizens because they
receive exceptionally strong backing from foreign powers. To assure a steady flow of hydrocarbons,
oil-importing governments may use their influence to help friendly autocrats stay in power – either by
intervening on their behalf or by augmenting their military and police forces through arms transfers and
training, enhancing their ability to ward off popular uprisings and military coups.
Thus, the argument suggests that it is the massive, easily appropriated profit from oil that provides
greater incentives for dictators to monopolize the state. These have led to “oil hinders democracy”
literature, which dates back to the contribution on rentier states and oil in Iran by Mahdavy (1970) and
Luciani (1987). Drawing on the rentier state theory, the •political resource curse•literature argues that
oil wealth entrenches autocracy and hinders democracy (Anderson, 1987; Beblawi and Luciani, 1987;
Ross, 2001; Jensen and Wantchekon, 2004). Mulligan and Tsui (2008) and Tsui (2010) show that
lucrative oil reserves provide strong incentives for greedy dictators to remain in power – and they use
fear to deter their greedy political opponents.
Thus, empirical results that support the “oil-hurts-democracy” thesis include Barro (1999), Ross
(2001), Jensen and Wantchekon (2004), Smith (2004), Tsui (2011) and Aslaksen (2010). In a re-
visitation of the evidence, Ross (2009) finds that oil wealth strongly inhibits democratic transitions in
15
authoritarian states; oil’s anti-democratic effects seem to vary over time and across regions, and they
have grown stronger over time, but do not hold in Latin America.
Additionally, Caselli (2006) develops a model of the natural resource curse which predicts a negative
relationship between resource income and political survival. The model’s essential idea is that natural
resource wealth is more easily appropriated by the governing elites than are other sources of wealth. As
a result, countries with large natural resource endowments experience frequent power struggles, in the
sense that potential challengers have a stronger incentive to replace the existing government by staging
a coup or engaging in other forms of forced leadership changes. Hence, in countries with large amounts
of natural resources, there will be a greater probability that the government will lose power to
challengers.
The results from Tsui’s (2011) panel data analysis suggest a conditional natural resource curse. Despite
the conditional effect, Tsui concludes by supporting the claim that “richness in natural resources leads
to negative economic and political outcomes”. In a regression analysis of time-series cross-section data
on 18 Latin American countries, Dunning (2008) finds that oil wealth is positively and significantly
linked to democracy. Tsui 2011) uses detailed industrial data on the history of worldwide oil
discoveries to provide new evidence for the long-term significant negative effect of oil wealth on
democracy. Using meta-regression analysis, Ahmadov (2013) finds a nontrivial negative association
between oil and democracy across the globe, with a notable variation in this relationship across world
regions and institutional contexts.
Its critics contend that this negative association is far from conclusive. Some claim that it is
circumscribed to specific instances or geographic areas, such as the Middle East and North Africa
(MENA) (Herb, 2005). Oskarsson and Ottosen (2010) argue that there can be a temporal variation in
the strength and direction of the relationship. Others argue that oil may not hinder democracy and can
even be a blessing in other geographic regions, such as Latin America (Smith and Kraus, 2005;
Dunning, 2008), or across regions (Gurses, 2009; Haber and Menaldo, 2011). The claim that oil wealth
tends to block democratic transitions has recently been challenged by Haber and Menaldo (2011), who
use historical data going back to 1800 and conclude there is no “resource curse.” They thus confirm the
results of Gurses (2009). However, Andersen and Ross (2012) revisit Haber and Menaldo data and
models, and show they might be correct for the period before the 1970s, but since about 1980 there has
been a pronounced resource curse. They argue that oil wealth only became a hindrance to democratic
transitions after the transformative events of the 1970s, which enabled developing country governments
to capture the oil rents that were previously siphoned off by foreign-owned firms. They also explain
why the Haber-Menaldo study failed to identify this: partly because the authors draw invalid inferences
from their data; and partly because they assume that the relationship between oil wealth and democracy
has not changed for the last 200 years.
Dunning (2008) argues that some Latin American countries such as Venezuela have experienced an
increase in democracy when crude prices rise. Dunning argues that the positive relationship has to do
with a political bargain between the elite and society, particularly the role of minimal taxes on the elite
in non-oil sectors and increased spending by the government on social programs. Brooks and Kurtz
(2012), using global data from 1960-2009, conclude that oil wealth is not necessarily a curse, and may
even be a ‘blessing’ with respect to democratic development. Still others find that political regime
dynamics are determined by factors other than oil wealth (Horiuchi and Wagle, 2008). Other
16
contributions that do not find empirical support for the oil/natural resource hurts democracy thesis
include Alexeev and Conrad (2009), Ulfelder (2007), Brunnshweiler and Bulte (2008) and Horiuchi
and Wagl´e (2008).
Apart from oil wealth, other variables have been identified in the literature for influencing democracy.
The “modernization theory” of democratization posits that increases in income are conducive to
increases in democracy levels, that is, democratic regimes are created and consolidated in affluent
societies (e.g. Lipset, 1959; Przeworski et al, 1997; Barro, 1999; Epstein et al, 2006). This is because
higher incomes reduce the intensity of conflict over the distribution of income, and thereby give way to
democratic institutions that discourage expropriation and support redistributive fiscal policies under the
rule of law (e.g. Benhabib and Rustichini, 1996; Benhabib and Przeworski, 2006). Alternatively,
citizens of wealthier countries with high levels of human capital and high incomes may be more
effective at creating and sustaining democratic institutions (e.g. Glaeser, et al, 2004). However, papers
by Acemoglu, et al (2008, (2009) cast doubt on the robustness of the cross-country empirical
relationship between income and democracy. Using Freedom House and Polity measures of democracy
in a cross-country panel between 1960 and 2000 as well as a binary democracy measure used by
Przeworski, et al (2000), these authors find no statistically significant effect of income on democracy.
However, more recently, Benhabib, Corvalan and Spiegel (2011) find a robust statistically significant
positive income-democracy relationship. Gundlach and Paldam (2009) found that income explains the
long-term political regime. Economic development as represented by per capita income can lead
citizens to ask for institutional changes suitable for investments.
This akin to “Lipset hypothesis”. A common view since Lipset’s (1959) research is that prosperity
stimulates democracy; this idea is often called the Lipset hypothesis. Lipset credits the idea to Aristotle:
‘‘From Aristotle down to the present, men have argued that only in a wealthy society in which
relatively few citizens lived in real poverty could a situation exist in which the mass of the population
could intelligently participate in politics and could develop the self-restraint necessary to avoid
succumbing to the appeals of irresponsible demagogues’’ (p. 75). Despite the lack of clear predictions
from theoretical models, the cross-country evidence examined in the present study confirms that the
Lipset/Aristotle hypothesis is a strong empirical regularity. In particular, increases in various measures
of the standard of living forecast a gradual rise in democracy. In contrast, democracies that arise
without prior economic development—sometimes because they are imposed by former colonial powers
or international organizations—tend not to last. Given the strength of this empirical regularity, one
would think that clear-cut theoretical analyses ought also to be attainable.
Using a panel of over 100 countries from 1960 to 1995, Barro (1999) finds the propensity for
democracy rises with per capita GDP, primary schooling, and a smaller gap between male and female
primary attainment. Also, for a given standard of living, democracy tends to fall with urbanization and
with a greater reliance on natural resources (oil country dummy). Democracy has little relation to
country size but rises with the middle-class share of income. In addition, the apparently strong relation
of democracy to colonial heritage mostly disappears when the economic variables are held constant. In
the same vein, allowance for economic variables weakens the interplay between democracy and
religious affiliation though the negative effects from Muslim and non–religious affiliations remain
intact.
17
Fiorino and Ricciuti (2007) investigate the demographic (population size and population density),
economic, political and cultural determinants of direct democracy in 87 countries using an index of
direct democracy. They find that per capita income, education and a larger share of Catholic population
are positive determinants, whereas ethnic fractionalization is depending on the estimation technique. In
addition, political rights and stability also work as prerequisites to direct democracy while direct
democracy seems independent from the institutional structure.
The ethnological fractionalization of a country, including ethnicity, religion, and language can be
important determinants of democracy. Barro (1999) opines that the more heterogeneous a country, the
more difficult is it to sustain democracy. Besides the impact of single religions, the religious
composition of a country might also play a role. According to Przeworski et al (2000), in religious
heterogeneous countries political systems are less stable. Indeed, ethnic fragmentation is shown to
affect political regimes (see, for example, La Porta et al., 1999). Riding on the lack of cultural and
ethnic cohesion, elites in heterogeneous societies are likely to maintain their political power and to
avoid institutional reforms (Alesina et al., 2003; Aghion et al., 2004).
According to Lipset (1959), the British rule during the colonial time provided crucial learning
experience for subsequent democracy. Similar positive impact has been argued by Bollen and Jackman
(1985) as well as Przeworski et al (2000). This is because the British introduced reforms that facilitated
the way towards democracy, including bureaucratic structures or the rule of law (Rueschemeyer et al,
1992; Iqbal, 2012). In a number of papers Shleifer with his co-authors has argued that legal origins
have an impact on institutions and therefore on outcomes (Glaeser and Shleifer, 2002). Legal origins
affect judicial independence and this has an effect on the protection of property rights; legal origins
influence the regulation of entry and this affect corruption (Djankov et al., 2002); the quality of
government and political rights impinge on the legal origins (La Porta et al., 1999).
4. The Model And Descriptive Statistics
4.1. The Model
Based on the above review, the relationship that we want to estimate can be written as:
)1.......(),........,.....,1;,....,1(
)log()log( 21
TtNi
XOilwealthDemocracy itiititiit
where Democracyit is the democracy index (calculated from the polity2 and normalized to take values
between 0 and 1, with 1 being most democratic) in country i in year t. The polity2 index is a composite
indicator constructed to reflect the competitiveness and openness of political executive recruitment,
constraints on the chief executive, and the regulation and competitiveness of political participation. The
main variable of interest is Oilwealthit, (the log of) oil wealth per capita. The parameter β1 measures the
causal effect (also a semi-elasticity) of oil wealth per capita on democracy. All other potential
covariates are included in the vector Xit. The vector of country characteristics Xit includes per capita
GDP, population, population density, mountainous area, ethnic fractionalization, religious
fractionalization, language fractionalization, a dummy for British legal origin, and an institutional
18
variable, rule of law. In addition, λi denotes key regional fixed effects while εit is an error term
capturing all other omitted factors, with E(εit) = 0 for all i and t.
It has been posited that the duration of political leadership depends on the economic environment in
which the leader acts (Lipset 1960). Indeed, Lipset (1959) discusses a broad category of economic
development as determinant of democracy, including indices of wealth (per capita income).
Specifically, Lipset (1959) supports the idea that prosperity, measured particularly by per capita GDP
and education, stimulates democracy. This idea is often called the Lipset hypothesis. The key element
of this hypothesis is that richer countries are more willing to promote democratic values and receptivity
to democratic political tolerance norms. This is also referred to as the “modernization hypothesis”.
According to the “modernization hypothesis”, economic development spurs the introduction and
maintenance of higher-quality institutions, including well-functioning representative democracy
(Lipset, 1959; Huntington, 1991). To proxy for modernization, we use the log of per capita GDP.
Modernization here refers to social changes linked with income. These social changes are likely to
increase standards of living and to promote the process of democratization (Kalyvitis and Vlachaki,
2011).
Governability of countries seems to become more difficult in large countries (Cuaresma et al., 2011;
Andersen and Aslaksen, 2012) hence the use of population size as a key determinant of democracy.
Following this argument, a negative correlation between the population variable and democracy is
expected. After the end of the cold war, an increased interest in demographic factors as potential causes
of armed conflict and reduction of democracy has emerged. The debate about demography and
democracy originates from the ‘‘resource scarcity’’ or ‘‘neo-Malthusian’’ school of thought. Rapidly
growing populations, especially in developing countries, may outpace the local natural resource base,
eventually forcing groups to fight over resource access. Another prominent demographic concern is
that as population increases, youth bulges (especially in Africa with the largest youth growth globally)
potentially increase the opportunity for political violence (e.g., Collier and Hoeffler, 2004), including
terrorism and rioting, all of which undermine democracy (Urdal, 2008). Population size is also a
measurement of state cohesion and institutional pluralism, that is, the degree to which the population
takes a state’s territorial borders for granted and identifies with a state independent of who controls its
government. Thus, low state cohesion reinforces the dynamics of exclusion and segmentation and leads
challengers to secessionist paths and undermining of democracy. A large country population, makes it
necessary for the center to multiply layers of agents to keep tabs on who is doing what at the local
level, and also increases the number of potential recruits to an insurgency.
High population density is likely to increase collective dissent; a higher population density might
increase social tensions arising from a scarcity of land, housing, and employment, and in turn may as
well as act as a pressure on some regions to “opt out” and lower the threshold for democratization (see,
for example, Deiwiks, Cederman and Gleditsch, 2012).
According to some recent studies, geographic position is a factor that contributes to the shaping of
political institutions. Geography can work against democratization in several ways. First, geographic
disadvantages such as lack of access to services and government due to poor terrain gravely impact
human development in general. Second, people living in isolated landlocked regions and other harsh
environments often struggle just to survive. Thus, participation in a democratic government are often
considered luxuries in the face of these basic survival needs. Fearon and Laitin (2003), for example,
19
view terrain as part of the technology of insurgency (mountains provide hideouts for rebels and favor
guerrilla tactics), thus undermining democracy. This insurgency model maintains that wars break out
when government forces are weak and when mountainous terrain allows rebels to hide and retreat
(Hegre and Sambanis, 2006).
The population’s degree of heterogeneity with respect to ethnicity, language, and religion/culture may
also matter for democracy. The usual idea is that more heterogeneity makes it more difficult to sustain
democracy. In connection with this is also the ethnological fractionalization, including language, culture
and ethnicity. Barro describes that the more heterogeneous a country, the more difficult is it to sustain
democracy (Barro 1999). According to Fish and Brooks (2004) greater diversity is associated with a
higher propensity for major civil conflict, which is an antagonist of open rule, hence greater
fractionalization makes things hard for democracy. This is akin to what Diskin, Diskin, and Hazan
(2005) call "cleavages" whereby "countries with deep or parallel social cleavages, or both, are more
prone to democratic collapse than those with low or cross-cutting cleavages, or both” (p.293). A
standard measure of a population’s heterogeneity is its ethnolinguistic and religious fractionalization, a
measure of disparity of ethnicity, languages and religion within a country. The variable runs between
zero and one and is intended to measure the probability that two randomly chosen persons in a country
come from different groups. Hence, zero is the most homogeneous, and one is the most heterogeneous.
Mauro (1995), La Porta et al. (1999), and Alesina et al. (2003) point on ethnic heterogeneity as
determinant of economic success both in terms of output (GDP growth) and the quality of institutions
(measured by the extent of corruption, political freedom, etc.). The results show that the democracy
index they use is negatively impacted by racial fractionalization. The role of cultural conditions –
especially religious fractionalization - on democracy has been discussed by Huntington (1991), Putnam
(1993), Lipset (1994), Boone (1996), Landes (1998), La Porta et al. (1999), and Goldsmith (2001).
Colonial heritage would be important for democracy if countries inherited tendencies for more or less
political freedom from their previous rulers. For example, Lipset et al. (1993) argue that British rule
provided a crucial learning experience for subsequent democracy. Diskin, Diskin, and Hazan (2005)
see colonial history as a proxy for "unfavorable history", which they rationalize as "countries with
undemocratic or mixed historical backgrounds...are more prone to democratic collapse than those with
democratic historical, cultural, and civil societal backgrounds” (p.294). In their view, British
colonialism brought at least the premise of democracy to the nations that were colonies hence a positive
unit-change in the British Colonialism variable should significantly increase the dependent variable of
democracy.
A measure of risk guide to democracy is the overall maintenance of the rule of law or the ‘‘law and
order tradition’’. As the Canadian Bar Association (2007) has opined, the rule of law is a key pillar of
good governance and democracy requires the commitment to the rule of law for without the rule of law,
democracy is not sustainable. According to Barro (1999, 2013), efforts to promote the rule of law can
bear substantial fruit in promoting development; promotion of democracy, by contrast, is uncertain at
best in spurring economic growth or laying a solid foundation for economic freedom (Barro, 1999,
2013). There is plenty of evidence from around the world that rule of law is a critical factor in
empowering individuals, ending discrimination, and enhancing competition (Feulner, 2013).
20
4.2. Descriptive Statistics
The descriptive statistics are presented in Table 1. It reports the sample mean, median and standard
deviation of the variables used in the estimations.
Figure 11 shows a statistically significant negative association between average oil wealth and
democracy over the period, 1955 to 2008. This indicates that oil rich countries are less likely to
experience democracy. The slope of the regression line from the simple plot is -0.005, suggesting that a
reserve of 10 billion barrels of oil will make a country 5 percentage points less democratic than one
with no oil.
Table 1: Africa: Descriptive Statistics of Regression Variables
Variable Observations Mean Median Standard
Deviation
Democracy 2275 0.343 0.200 0.283
Log (oil wealth per capita)
(ASPO) 2156 -16.364 -20.694 8.073
Log (oil wealth per capita) (BP
& OGJ) 2476 -15.783 -20.694 8.031
Log (oil wealth per capita)
(ASPO, BP & OGJ) 2598 -14.093 -20.694 10.585
Log (value of oil wealth per
capita) (ASPO, BP & OGJ) 2598 -10.829 -17.665 10.971
Log (GDP per capita) 2754 07.082 6.963 0.699
Log (population) 2754 8.188 8.446 1.602
Log (population density) 2754 3.045 3.161 1.402
Log (mountainous) 2646 -0.974 1.163 5.110
Ethnic fractionalization 2808 0.631 0.719 0.247
Religious fractionalization 2862 0.460 0.554 0.276
Language fractionalization 2754 0.593 0.701 0.294
British legal origin 2808 0.346 0 0.476
Rule of law in 1996 2700 -0.721 -0.782 0.737
Source: Author's calculations, using data from the World Bank WDI (2012).
21
Figure 11: Oil Wealth and Democracy in African Countries, 1955-2008.
Source: Authors, using estimation data.
5. Empirical Results
Table 2 reports the main regression results. Consistent with most previous results, we find that more oil
wealth is statistically associated with less democratization when we estimate the relationship both in a
pooled cross-sectional and time-series and fixed effect settings. The estimates of the oil wealth
coefficient are respectively, -0.003 and -0.005. Point estimates of semi-elasticity of 0.003 to 0.005
imply that a 1 standard deviation increase in oil wealth per capita (approximately 10 log points)
corresponds to a decrease in the annual democracy by 0.024 to 0.040 (0.003 × 8.073 to 0.005 x 8.031),
with an implied elasticity of 0.009 and 0.015, respectively (evaluated at the mean of democracy
variable, 0.343).
AGOBDI
BEN
BFA
BWA
CAF
CIVCMR
CODCOG
COM
DJI
DZAEGYGAB
GHA
GIN
GMB
GNB
GNQ
KENLBR
LBY
LSO
MAR
MDG
MLIMOZ
MRT
MUS
MWI
NAM
NER
NGA
RWA
SDN
SENSLESOM
SWZ
TCDTGO
TUN
TZA
UGA
ZAF
ZMBZWE
0.2
.4.6
.81
Dem
ocra
cy
-20 -10 0 10Oil reserves per capita-full
(mean) democracy Fitted values
22
Table 2: Oil Wealth and Democracy in Africa Variable Oil wealth is oil reserves per capita
from ASPO
Oil wealth is oil reserves per capita
from BP & OGJ
Robust Pooled
OLS
Fixed Effects Robust Pooled
OLS
Fixed Effects
Log (oil wealth per capita) -0.003**
(-2.35)
-0.003**
(-2.48)
-0.005***
(-4.74)
-0.005***
(-4.97)
Log (GDP per capita) 0.071***
(4.74)
0.058***
(4.50)
0.100***
(7.20)
0.066***
(5.65)
Log (population) 0.033***
(4.32)
0.016**
(2.27)
0.055***
(7.79)
0.023***
(3.68)
Log (population density) 0.023***
(3.87)
0.016**
(3.10)
0.026***
(4.71)
0.014**
(2.95)
Log (mountainous) -0.011***
(-7.41)
-0.011***
(-7.54)
-0.011***
(-7.58)
-0.010***
(-8.17)
Ethnic fractionalization 0.302***
(5.33)
0.303***
(6.49)
0.239***
(4.62)
0.254***
(6.03)
Religious fractionalization 0.008
(0.23)
0.036
(1.18)
0.011
(0.31)
0.066**
(2.34)
Language fractionalization -0.192***
(-5.36)
-0.196***
(-7.54)
-0.168***
(-4.95)
-0.180***
(-6.29)
British legal origin 0.091***
(5.61)
0.099***
(7.24)
0.060***
(3.94)
0.075***
(5.97)
Rule of law in 1996 0.106***
(9.08)
0.101***
(9.24)
0.085***
(7.68)
0.080***
(8.12)
North Africa -0.159***
(-3.87)
-0.108**
(-2.64)
-0.241***
(-6.53)
-0.125***
(-3.58)
Sub-Saharan Africa
Constant -0.594***
(-3.86)
-0.359**
(-2.72)
-0.992***
(-6.78)
-0.486***
(-3.92)
R-squared (overall)
F-statistic
Prob > F
N
Hausman test
0.2288
49.11
0.0000
1535
0.2441
43.31
0.0000
1535
303.08***
0.2372
68.03
0.0000
1839
0.2216
50.49
0.0000
1839
4234.39***
Source: Author's calculations.
Note: *** 1% significant level; ** 5% significant level; * 10% significant level.
ASPO: The Association for the Study of Peak Oil and Gas;
BP: British Petroleum Statistical Review of World Energy;
OGJ: Oil & Gas Journal.
The direction and size of the estimated long-term impact of oil discovery on democratic development
are broadly consistent with those suggested by Figure 11.
Other coefficients estimates seem plausible and are consistent with previous findings. For example,
GDP per capita is positively correlated with democracy. This positive and highly significant effect of
per capita income of democracy means that direct democracy is an ordinary good that is consumed
more in richer societies. Therefore, our results are consistent with the Lipset/modernization hypothesis.
Population and a country’s population density do have a systematic positive effect on democratic
development. The estimated coefficient on the log of population is positive and highly significant in all
the estimations. Thus, there is strong indication that larger (more populous) countries are more likely to
be democratic. The same applies to population density. However, mountainous terrain has strong
negative effect on democracy in Africa.
23
The proposition by Aghion et al. (2004) is that in more fragmented societies a group imposes
restrictions on political liberty to impose control on the other groups is not verified. Ethnic
fractionalization, in all the estimated results, is positive and highly significant, contrary to this theory.
That is, ethnic fractionalization promotes democracy. Thus there is strong indication that more
ethnically diverse countries are more likely to sustain democracy. On the other hand, the coefficient of
the language fractionalization variable is negative and highly significant, strongly indicating that more
linguistically diverse countries are less likely to sustain democracy. The religious fractionalization
variable, though positive, is not consistently significant.
In addition, our results suggest that the influence of former colonial status, in the form of British legal
origin, on democratic tendency is very strongly positive. The coefficient is positive and highly
significant in all the estimations. Thus, countries with British legal origin appear to become more
democratic over time.
We find that a significant variable concerned with the political infrastructure of a country is the the rule
of law. Our results also show that the estimated coefficient on the rule-of-law variable is positive and
highly significant. Thus, better maintenance of the rule of law promotes democratic development. The
positive and significant coefficient of this variable suggests that the higher the quality of the democratic
process, the higher the likelihood of sustaining direct democracy. There is thus evidence that better
maintenance of the rule of law promotes democracy.
Consistently, North African countries are significantly less democratic than Sub-Saharan African ones.
This is also consistent polity2 data presented on Figure 10 earlier.
Robustness checks with combined data from ASPO, BP and OGJ for the period, 1955 to 2008, confirm
the above results (see Table 3). The estimates of the coefficients and their significance are similar to
those in Table 2. This suggests that antidemocratic property of oil wealth is a general phenomenon.
24
Table 3: Oil Wealth and Democracy in Africa - Robustness Check Variable Oil wealth is oil reserves per capita from ASPO, BP & OGJ
Robust Pooled OLS Fixed Effects
Log (oil wealth per capita) -0.002**
(-2.95)
-0.003***
(-4.14)
Log (GDP per capita) 0.083***
(6.44)
0.055***
(5.15)
Log (population) 0.052***
(7.45)
0.024***
(3.82)
Log (population density) 0.028***
(5.21)
0.014**
(3.03)
Log (mountainous) -0.010***
(-7.46)
-0.010***
(-8.13)
Ethnic fractionalization 0.250***
(4.85)
0.263***
(6.32)
Religious fractionalization -0.009
(-0.27)
0.053*
(1.90)
Language fractionalization -0.172***
(-5.08)
-0.179***
(-6.30)
British legal origin 0.068***
(4.55)
0.080***
(6.48)
Rule of law in 1996 0.097***
(9.53)
0.089***
(9.57)
North Africa -0.266***
(-7.33)
-0.147***
(-4.30)
Sub-Saharan Africa
Constant -0.789***
(-5.84)
-0.367***
(-3.28)
R-squared (overall)
F-statistic
Prob > F
N
Hausman test
0.2354
65.65
0.0000
1928
0.2197
51.36
0.0000
1928
2494.47****
Source: Author's calculations.
Note: *** 1% significant level; ** 5% significant level; * 10% significant level.
ASPO: The Association for the Study of Peak Oil and Gas;
BP: British Petroleum Statistical Review of World Energy;
OGJ: Oil & Gas Journal.
6. Conclusion And Lessons For Policy Implications
This paper has investigated empirically the effects of oil wealth on democracy. In a cross-country panel
data, covering 52 African countries between 1955 and 2008, we estimate the effects of oil wealth on
democracy. The paper finds a nontrivial negative association between oil wealth and democracy in
Africa. It confirms findings of the rentier-state theorists and scholars who arrived at the same
conclusion through empirical tests. In particular, we find that oil wealth is statistically associated with a
lower likelihood of democratization when we estimate the relationship in a pooled cross-sectional and
time-series setting. In addition, when estimated using fixed effects, the strong negative statistical
association continues to hold. Indeed, this result is robust to the source of oil wealth data, the choice
and treatment of the variables set, and the sample selection.
Our results also show other interesting and important results. The cross-country evidence examined in
the study confirms that the “Lipset/Aristotle/modernization hypothesis” (that prosperity stimulates
25
democracy) is a strong empirical regularity. In particular, increases in GDP per capita, a measure of
standard of living, lead to a rise in democracy. Also, the propensity for democracy rises with
population size, population density, ethnic fractionalization, having British legal origin or colonial
heritage, and having a supportive institutional environment in the form of maintenance of the rule of
law. However, apart from oil wealth, democracy tends to fall with linguistic fractionalization and rough
(mountainous) terrain. Moreover, consistent with the data, North Africa consistently fails to favor
democratic development.
Our findings add to the large and controversial literature on the “natural resource curse,” which
contends that richness in natural resources leads to negative economic and political outcomes. The
resource curse doctrine holds that natural resource wealth is an obstacle to economic and political
development that can be overcome only through well-designed resource wealth management.
These results have important implications for countries in Africa where improving democracy is at
stake for the international community. The paper, therefore proffers policy recommendations along
these lines and in particular to promote effective democracy and prevent key scenarios hindering
democracy due to oil wealth: rentier, repression and corruption effects.
How can political leaders and elites use oil wealth to avoid the political resource curse and promote
democracy in Africa? Three measures proposed by van de Ploeg and Venables (2012) are relevant here.
The first mechanism is to establish measures to promote high levels of transparency. This involves
making the Executive Head’s spending spree visible so that he/she can be held accountable for
inefficient spending; and putting a check on grossly inefficient spending by making spending agencies
accountable to parliament and the public. The second mechanism is to ensure that the political system
has a centralized system of financial authority and control. We believe that the Ministry of Finance is
the best organ of government that can trade-off the competing demands of spending ministries,
regional/state and local authorities, or other lobby groups. The Ministry is best placed to internalize the
free rider problem associated with a common pool of government revenues. However, as the Nigerian
case has demonstrated through NEITI reports, to play this role effectively the Ministry of Finance has
to have control of incoming natural resources revenues, and the political will and power to be able to
resist competing demands. The third is the legislation of a ‘fiscal constitution’ (as in Chile) that
imposes ceilings (and perhaps also floors) on public spending from resource revenues or public funds
more generally. However, to be effective, such a fiscal constitution has to be robust to changing
political and economic circumstances, while at the same time not being so rigid as to rule out
extraordinary responses in extraordinary times, especially since natural resources prices (and hence
revenuers) are subject to wide volatility. But the issue of volatility can complementarily be obviated by
the establishment of an independent Sovereign Wealth Fund (SWF) that caters for both future
generations through saving and present generation through productive investments in infrastructure,
institutional and human capital development.
As the case of some countries has demonstrated, natural-resource abundance, its discovery and
profitable exploitation, is neither an automatic blessing nor an inescapable death sentence for a nation’s
economy and its polity. Institutions, like the rule of law, matter. Norway is a good example of how
natural-resource abundance can be a blessing when accompanied by strong public and private
institutions. Norway has sound and stable institutions. For example, it cores well above the global
average in the rule of law indicator of the World Bank. It scored 1.89 (out of the range of -2.5 to +2.5)
26
in 2011 against the global average of -0.00014 – compared to very poor scores by key African oil and
gas exporters: DRC (-1.60), Chad (-1.46), Sudan (-1.26), Nigeria (-1.25), Angola (-1.23), Equatorial
Guinea (-1.21), Congo (-1.16), Libya (-1.16), and Algeria (-0.82). As a result, Norway has the fourth-
highest GDP per capita in the world and ranks number one out of 168 countries in the EIU democracy
index in 2012 (scoring 9.93 out of 10) —far from a curse, economic or political! A majority of the
African oil giants are classified among the authoritarian regimes – for example, Nigeria ranks 120 with
a score of only 3.77.
It is therefore imperative that African countries take measures to promote and maintain effective rule of
law and other related institutions. An effective rule of law is the one that protects the rights of citizens,
maintains order, and limits power of government. In such a state, all citizens are equal under the law;
there are no arbitrary arrest, exile, or imprisonment; no one is above the law; no government official or
its agent may violate the legal and constitutional limits of government; the courts are independent in
structure and in fact; the right to know the charges against one with the presumption of innocence until
proven otherwise by a legitimate, independent and impartial court of law; there is right to a fair,
speedy, and public trial by an impartial court; where no one may be taxed or prosecuted except by a
law established in advance for that purpose; and where no one may be subjected to torture or cruel and
inhumane treatment. Democracy will thrive and be sustained and stable when there is the willingness to
lose (contestation) and when there are capacities to challenge and enforce the rules of the game.
Contestation means that parties are able to win but are willing to lose. In other words, opposition
parties have to be able to compete effectively with incumbents, with the credible potential to hold
incumbents accountable while voters and parties must be willing to lose elections. Also, laws must be
effectively enforced. This means that a sturdy, thriving, durable and stable democracy requires a
government with the capacity to enforce both the rules of the game and the policies produced through
those rules against violation or nullification either by abusive agents of the government itself or by
private actors, whether common criminals, would-be warlords or the military.
Indeed, the rule of law is fundamental to securing African democracy. That is, democratic governance
also needs the architecture of law: ministry of justice, courts, legislative scrutiny, law enforcement
agencies, regulatory bodies, public defenders, police, correctional system, legal statutes, contracts,
university level academic education to train lawyers, judges, and investigators, along with engagement
with civil society to promote a culture of lawfulness. The presence of the rule of law is a major factor
in assuring voluntary acceptance of a government’s authority and therefore its legitimacy. A
government’s respect for preexisting and impersonal legal rules can provide the key to gaining it
widespread, enduring social support. Such government respect for rules—ideally ones recorded in a
constitution and in laws adopted through a credible, democratic process—is the essence of the rule of
law. As such, it is a powerful potential tool for counterinsurgents and anti-democratic elements. All
these call for political will on the part of politicians, elites and bureaucrats in Africa, ensuring that laws
are sound and stable, that the legal interpretation and enforcement of contractual and statutory
obligations are reliable, and ensuring effective collaboration of the legislature, the executive, and the
judiciary.
Finally, our results confirm the “Lipset/Aristotle/modernization hypothesis”, that is, prosperity
stimulates democracy. In particular, increases in GDP per capita, a measure of standard of living, lead
to a rise in democracy. Therefore, African countries must take measures to increase their national
incomes. To increase per capita income, African countries must deepen macroeconomic and structural
27
reforms to increase their competitiveness, create increasing and more quality jobs and hence increase
participation in economic activity, dismantle existing structural bottlenecks to private and public
investment, scale-up investments in hard and soft infrastructure to enhance local production and
regional integration, check rapid population growth, structurally transform the economy for increased
trade competitiveness in knowledge-intensive manufacturing, and increase productivity, especially in
agriculture, through creating incentives and opportunities for the private sector and increasing
government support to small farm holders in terms of finance, formalization of land ownership, and
technical advice.
Our results also show that North Africa consistently fails to favor democratic development.
Unfortunately, the recent overthrow or challenge of former regimes in the region have not yet led to
smooth transitions to democratic and pluralistic societies governed by the rule of law in any of the
North African countries. Rather, these countries have moved very quickly from ‘revolutionary’
moments to what are essentially civil wars (with the exception of Tunisia), showing that those who
succeeded the liberalized autocracies have proved to be incompetent clods in the business of
governance. This is essentially because the ways of soldiers and spirituality (especially when couched
under “fundamentalism” versus “secularism”) are designed for other worlds than the responsibility of
governance that is inclusive and equitably providing services and opportunities for millions of people
from different religions, ideologies and ethnicities (Khouri, 2013). What is needed, therefore, is deep
introspection and political reform of the various institutions and political parties seeking to govern so
as to promote a sustained commitment to democracy that will ensure the embrace and guarantee of
equal citizenship, political pluralism, freedom, human rights, general respect for others, and socio-
political cum economic inclusion. This will also ensure that public frustrations are expressed at the
ballot box, in the media, and in peaceful assemblies, with the state actively responding with corrective
policies rather than simply suppressing criticisms and opposition.
Appendix 1- Data, Data Sources and Country List
The data set is from Cotet and Tsui (2013), with the following sources:
Oil Data: Log (Oil Wealth per capita) represents (the log of) oil reserves per capita Data sets are from
the Association for the Study of Peak Oil and Gas (ASPO), BP Statistical Review of World Energy
(BP), and Oil & Gas Journal (OGJ) as follows:
Source: The Association for the Study of Peak Oil and Gas (ASPO)
1) oilreserves – oil reserves in trillion barrels
2) logoilres – log of oil reserves per capita
3) valoilres – value of oil reserves (oilpop*crude oil price)
4) logvaloilres – logarithm of oil reserves per capita
5) logvalprod – log of value of oil production
Combined Sources: The Association for the Study of Peak Oil and Gas (ASPO), BP Statistical Review
of World Energy(BP) and Oil & Gas Journal (OGJ)
1) oilpop_public – oil reserves per capita (BP and OGJ used to extend the ASPO data to 2008)
2) oilreserves_public - oil reserves per capita from public data (BP and OGJ used to extend the ASPO
data to 2008)
3) logoilres_public – log of oilreserves_public (BP and OGJ used to extend the ASPO data to 2008)
4) oilreserves_full - oil reserves per capita from all sources (ASPO, BP and OGJ)
5) logoilres_full – log of oilreserves_full (ASPO, BP and OGJ)
28
6) logvaloilres_full - log of value oil reserves per capita from all sources (ASPO, BP and OGJ)
The ASPO dataset provides detailed information on both oil discoveries, reserves and production for 62
top oil-producing countries over the period 1930-2003 – our own sample starts from 1955 to match
other variables. The BP and the OGJ data provide self-reported oil reserves data for a larger sample (we
use data from 1955 to 2008), which include countries with little or no oil reserves. We use these data to
identify countries with no oil in the main sample we use in our panel regressions.
Other Variables
Log (GDP per capita) is defined as (the log of) GDP per capita in a country-year expressed in 1990 US
Dollars. (Source: Maddison’s Statistics on World Population)
Log (Population) is (the log of) population (expressed in thousands) in a country-year (source:
Maddison’s Statistics on World Population.
Log (Population Density) is (the log of) population per square kilometer.
Democracy is calculated from the polity2 (source: Polity IV) variable normalized to take values
between 0 and 1, with 1 being most democratic.
Log (Mountainous) is (the log of) the mountain area percentage in a country (source: Gerrard, 2000).
Ethnic Fractionalization is computed as one minus the Herfindahl index of ethnic group shares–
(source: Alesina et al, 2003).
Religious and language fractionalizations are computed in a similar way–(source: Alesina et al, 2003)-
(source: Alesina et al, 2003).
British Legal Origin is a dummy variable indicating whether a country’s legal system is based on
British common law (source: Easterly’s Global Development Network Growth Database).
Rule_law96 – rule of law measured in 1996 (source: World Bank Governance Indicators)
Region fixed effects: North Africa and Sub-Saharan Africa.
Country List: The 49 African countries used in the estimations are: Algeria, Angola, Benin, Botswana,
Burkina Faso, Burundi, Cameroon, Central African Republic, Chad, Democratic Republic of Congo,
Republic of Congo, Cote d'Ivoire, Djibouti, Egypt, Equatorial Guinea, Gabon, Gambia, Ghana, Guinea,
Guinea Bissau, Kenya, Lesotho, Liberia, Libya, Madagascar, Malawi, Mali, Mauritania, Mauritius,
Morocco, Mozambique, Namibia, Niger, Nigeria, Rwanda, Senegal, Sierra Leone, Somalia, South
Africa, Sudan, Swaziland, Tanzania, Togo, Tunisia, Uganda, Zambia, Zimbabwe.
REFERENCES
Acemoglu, D., Johnson, S., Robinson, J. A. (2001), “The Colonial Origins of Comparative Income and
Democracy,” American Economic Review, 91(5), 1369-1401.
Acemoglu, D., Johnson, S., Robinson, J. A. and Yared, P. (2008), “Income and Democracy,” American
Economic Review, 98(3), 808-842.
Acemoglu, D., Johnson, S., Robinson, J. A. and Yared, P. (2009), “Reevaluating the Modernization Hypothesis”,
Journal of Monetary Economics, 56, 1043-1058.
Aghion, P.; Alesina, A.; and Trebbi, F. (2004), ”Endogenous Oolitical Institutions”. Quarterly Journal of
Economics, 119(2), pp. 565–611.
Ahmadov, A. K. (2013), “Oil, Democracy, and Context: A Meta-Analysis”, Comparative Political Studies,
0010414013495358, first published on July 19, 2013.
29
Alesina, A.; Devleeschauwer, A.; Easterly, W.; Kurlat, S.; and Wacziarg, R. (2003), ”Fractionalization”, Journal
of Economic Growth, 8(2), pp. 155–194.
Alexeev, M. and Conrad, R. (2009), “The Elusive Curse of Oil”, Review of Economics and Statistics, Vol.
91(3), pp. 586–98.
Anderson, L. (1987), “The State in the Middle East and North Africa”, Comparative Politics, 20(1), 1–18.
Andersen, J. J. and Aslaksen, S. (2012), "Oil and Political Survival", Journal of Development Economics, Vol.
100(1), pp. 89-106.
Andersen, J. J. and Ross, M. L. (2012), The Big Oil Change: A closer look at the Haber-Menaldo analysis, July
26, 2012.
Aslaksen, S. (2010), “Oil and democracy: More than a cross-country correlation?”, Journal of Peace Research,
47(4), 421–431.
Barro, R. J. (1999), “Determinants of Democracy”, Journal of Political Economy, 107(6), 158-183.
Barro, R. J. (2013), “Democracy, Law and Order, and Economic Growth”, in Bryan Riley, B. and Miller, T.
(eds), 2013 Index of Economic Freedom: No Boost in Trade Freedom, Heritage Foundation, Washington, D. C.
Beblawi, H. and Luciani, G. (1987), The Rentier State, Croom Helm, London.
Bhattacharyya, S. and Haodler, R. (2010), ”Natural resources, democracy and corruption”. European Economic
Review, 54(4), pp. 608–621.
Benhabib, J and Rustichini, R., (1996),"Social Conflict and Growth", Journal of Economic Growth, 1, 125-142.
Benhabib, J., and Przeworski, A., (2006), "The Political Economy of Redistribution under Democracy",
Economic Theory, 29 (2), 271-290.
Benhabib, J., Corvalan, A. and Spiegel, M. M. (2011), Reestablishing the Income-Democracy Nexus, NBER
Working Paper 16832, February.
http://www.nber.org/papers/w16832
Boix, C. (2003), Democracy and Redistribution, Cambridge University Press, Cambridge.
Boone, P. (1996), ‘‘Political and Gender Oppression as a Cause of Poverty’,’ London School Economics,
London, April.
BP (2013), BP Statistical Review of World Energy 2013, June, BP, London.
Brooks, S. M. and Kurtz, M. J. (2012), Oil and Democracy: Endogenous Natural Resources and the Political
‘Resource Curse’, February 27, 2012.
http://www.princeton.edu/politics/about/file-repository/public/Natural-Resource-Brooks-Kurtz-Princeton-2.pdf
Brumberg, D. (2002), “Democratization in the Arab World?: The Trap of Liberalized Autocracy”, Journal of
Democracy, Volume 13, Number 4, October, 56-78.
30
Brunnschweiler, C.N. and Bulte, E. H. (2008), “The natural resource curse revisited and revised: A tale of
paradoxes and red herrings”, Journal of Environmental Economics and Management, Vol. 55(3), pp. 248–64.
Canadian Bar Association (2007), Sustaining Democracy through the Rule of Law, January, Ottawa.
Caselli, F. (2006), Power Struggles and the Natural Resource Curse, LSE Research Online Working Paper, LSE,
London.
Clark, W. R., Golder, M., and Golder, S. N. (2012), Principles of Comparative Politics, 2nd Edition, CQ Press,
Washington, D. C.
Collier, P., and Hoeffler, A. (2004), “Greed and Grievance in Civil War”, Oxford Economic Papers, Vol. 56, pp.
563-95.
Cotet, A. M. and Tsui, K. K. (2013), “Oil and Conflict: What Does the Cross-Country Evidence Really Show?”,
American Economic Journal, 5(1), 49-80.
Cuaresma, C.J., Oberhofer, H. and Raschky, P. (2011), “Oil and the duration of dictatorships”, Public Choice,
Vol. 148, pp. 505-530.
Deutsch, K. W. (1961), “Social Mobilization and Political Development”, American Political Science Review,
Vol. 55 (3), 493-514.
Deiwiks, C., Cederman, L-E., and Gleditsch, K. S. (2012), “Inequality and conflict in federations”, Journal of
Peace Research, 49(2), 289–304.
Diamond, L. (1999), Developing Democracy: Toward Consolidation, Johns Hopkins University Press,
Baltimore, 10-12.
Diamond, L. (2012a), The Global Democratic Surge and Recession: Implications for Kenya's Development,
IEA-Kenya Annual Lecture, 29th March 2012, Laico Regency Hotel, Nairobi.
Diamond, L. (2012b), Liberal Democracy Electoral Democracy & the Quality of Democracy, 2012 Draper Hills
Summer Fellows Program, July 23.
Diskin, A., Diskin, H. and Hazan, R. Y. (2005), "Why Democracies Collapse: The Reasons for Democratic
Failure and Success", International Political Science Review, 26 (3), 291-309.
Djankov, S., R. La Porta, F. López-de-Silanes and A. Shleifer (2002), “The Regulation of Entry”, Quarterly
Journal of Economics, 117: 1-37.
Dunning, T. (2009), Crude Democracy: Natural Resource Wealth and Political Regimes, Latin American Politics
and Society, Vol. 51, No. 3 (Fall, 2009), pp. 167-169.
Easterly, W. and Levine, R. (2003), “Tropics, Germs and Crops: How Endowments Influence Economic
Development”, Journal of Monetary Economics, 50(1): 3-39.
Economist Intelligence Unit (2013), Democracy index 2012: Democracy at a Standstill, eiu, London.
Epstein, D., Bates, R., Goldstone, J., Kristensen, I. and O’Halloran, S. (2006), “Democratic Transitions,”
American Journal of Political Science, 50(3), 551-569.
31
Esteban, J., Mayoral, L. and Ray, D. (2012), Ethnicity and Conflict: An Empirical Study American Economic
Review, 102(4), 1310–1342.
Fearon, J. D. and Laitin, D. D. (2003), “Ethnicity, Insurgency, and Civil War”, American Political Science
Review, Vol. 97, No.1 (February), 75-90.
Feulner, E. J. (2013), “The Rule of Law”, in in Bryan Riley, B. and Miller, T. (eds), 2013 Index of Economic
Freedom: No Boost in Trade Freedom, Heritage Foundation, Washington, D. C.
Fiorino, N. and Ricciuti, R. (2007), Determinants of direct democracy, CESifo Working Paper, No. 2035, June.
http://hdl.handle.net/10419/26080.
Fish, M. S. (2005), Democracy Derailed in Russia, Cambridge University Press, New York.
Fish, M. S. and Brooks, R. S. (2004), “Does Diversity Hurt Democracy?”, Journal of Democracy, Volume 15,
Number 1, January.
Freedom House (2013), Freedom in the World 2013: Democratic Breakthroughs in the Balance, Freedom House,
Washington, D. C.
Glaeser, E.L. and A. Shleifer (2002), “Legal Origins”, Quarterly Journal of Economics, Vol. 117, 1193-1229.
Glaeser, E. L., La Porta, R., Lopez-de-Silanes, F. and Shleifer, A. (2004), “Do Institutions Cause Growth?,”
Journal of Economic Growth, 9(3), 271-303.
Golder, M., and Golder, S. N. (2012), “Cultural Determinants of Democracy and Dictatorship”, in Clark, W. R.,
Golder, M., and Golder, S. N. (2012), Principles of Comparative Politics, 2nd Edition, CQ Press, Washington,
D. C.
Goldsmith, A. (2001), ”Foreign aid and statehood in Africa”, International Organization, 55(1), pp. 123–148.
Gundlach, E. and Paldam, M. (2009), ”A farewell to critical junctures: Sorting out long-run causality of income
and democracy”, European Journal of Political Economy, 25(3), pp. 340–354.
Gurses, M. (2009), “State-sponsored development, oil and democratization”, Democratization, 16(3), 508-529.
Haber, S. and Menaldo, V. A. (2011), “Do Natural Resources Fuel Authoritarianism?: A Reappraisal of the
Resource Curse”, American Political Science Review, Vol. 105, No. 1, pp. 1-26.
Hegre, H. and Sambanis, N. (2006), “Sensitivity Analysis of Empirical Results on Civil War Onset”, Journal of
Conflict Resolution, Vol. 50 No. 4, August 2006, 508-535.
Herb, M. (2005), “No representation without taxation?”, Comparative Politics, 37(3), 297–316.
Huntington, S. P. (1991), The Third Wave: Democratization in the Late Twentieth Century, University of
Oklahoma Press, Norman.
Horiuchi, Y. and Wagle, S. (2008), 100 years of oil. Paper presented at the APSA 2008 Annual Meeting, Boston,
MA., August.
32
Inglehart, R. (1997), Modernization and Postmodernization, Princeton University Press, Princeton.
Iqbal, Z. (2012), The Economic Determinants of Arab Democratization, Middle East Institute, March 13.
Jensen, N. and Wantchekon, L. (2004), “Resource Wealth and Political Regimes in Africa”, Comparative
Political Studies, 37(7), 816–841.
Joseph, R. (1999), “Africa, 1990-1997: From Abertura to Closure,” in Diamond, L. and Marc F. Plattner, M. F.
(eds), Democratization in Africa,: Johns Hopkins University Press, Baltimore 1999.
Kalyvitis, S. and Vlachaki, I. (2011). ”When does more aid imply less democracy?: An empirical examination”,
European Journal of Political Economy, 28(1125), pp.132–146.
Khouri, R. G. (2013), When Political Clods Collide, Middle East Online, 17 August 2013.
http://www.middle-east-online.com/english/?id=60772
La Porta, R., F. Lopez-de-Silanes, A. Shleifer and R. Vishny (1999), “The Quality of Government”, Journal of
Law, Economics and Organization, 15: 222-279.
Landes, D. (1998), The Wealth and Poverty of Nations, W. W. Norton, New York.
Lipset, S. M., (1959), “Some Social Requisites of Democracy: Economic Development and Political
Legitimacy,” American Political Science Review, Vol. 53, No. 1, 69-105.
Lipset, S. M. (1960), Political Man: The Social Bases of Politics, Anchor Books, New York.
Lipset, S. M. (1994), ‘‘The Social Requisites of Democracy Revisited: 1993 Presidential Address’’, American
Sociological Review, 59 (February 1994): 1–22.
Lipset, S. M., Seong, K-R, and Torres, J. C. (1993), ‘‘A Comparative Analysis of the Social Requisites of
Democracy’,’ International Social Science Journal, 45 (May 1993): 155–75.
Luciani, G. (1987), “Allocation vs. Production States: A Theoretical Framework”, In Beblawi, H. and Luciani,
G. (Eds.), The Rentier State, London, Croom Helm, 63-82.
Mahdavy, H. (1970), “The Patterns and Problems of Economic Development in Rentier States: The Case of
Iran”, In Cook, M. A. (Ed.), Studies in Economic History of the Middle East London, Oxford University Press,
428-467.
Marshall, M. G. and Cole, B. R. (2011), Global Report 2011: Conflict, Governance, and
State Fragility, Center for Systemic Peace, December, Vienna, VA, USA.
Mauro, P. (1995), “Corruption and Growth”, Quarterly Journal of Economics, 110 (3):681-712.
Menard, A. (2012), Why foreign aid does (not) improve democracy?, Documents de travail du BETA n° 2012 –
19, Octobre.
Mulligan, C. B and Tsui, K. K. (2008), “Political Entry, Public Policies, and the Economy”, NBER Working
Paper 13830.
33
Oskarsson, S. and Ottosen, E. (2010), “Does oil still hinder democracy?”, Journal of Development Studies,
46(6),1067–1083.
Ploeg, F. van der and Venables, A. J. (2012), "Natural Resource Wealth: The Challenge of Managing a
Windfall", Annual Review of Economics, Vol. 4(1), p. 315-337.
Polity IV Project: Political Regime Characteristics and Transitions, 1800-2012.
http://www.systemicpeace.org/polity/polity4.htm
Przeworski A. and Limongi, F. (1997), “Modernization: Theories and Facts”, World Politics, 49:155-183.
Przeworski A., Alvarez, M., Cheibub, J. A. and Limongi, F. (2000), Democracy and Development: Political
Institutions and Material Well-being in the World, 1950-1990, New York: Cambridge University Press.
Putnam, R. (1993), Making Democracy Work: Civic Traditions in Modern Italy, Princeton: Princeton University
Press.
Rodrik D., Subramanian, A. and Trebbi, F. (2004), “Institutions Rule: The Primacy of Institutions over
Geography and Integration in Economic Development”, Journal of Economic Growth, 9:131-165.
Ross, M. L. (2001), “Does Oil Hinder Democracy?”, World Politics, 53(3), 325-361.
Ross, M.L. (2008), But Seriously: Does Oil really Hinder Democracy, UCLA Department of Political Science.
Ross, M. L. (2009). Oil and democracy revisited, Working Paper, UCLA.
Rueschemeyer, D., Stephens, J. D. and Stephens, E. H. (1992), Capitalist Development and Democracy.
University of Chicago Press, Chicago.
Smith, B. (2004),”Oil Wealth and Regime Survival in the Developing World, 1960–1999”, American Journal of
Political Science, Vol. 48(2), pp. 232–46.
Smith, B. and Kraus, J. (2005), Democracy despite Oil, Paper presented at the APSA Annual Meeting,
Washington, DC, August.
Sorensen, G. (1993), "Democracy, Authoritarianism, and State Strength", European Journal of Development
Research, Vol.5, No.1, pp.6-34.
Tsui, K. K. (2010), “Resource Curse, Political Entry, and Deadweight Costs”, Economics and Politics, 22(3),
471-497.
Tsui, K. K. (2011), “More Oil, Less Democracy: Evidence from Worldwide Crude Oil Discoveries”, The
Economic Journal, 121(551), March, 89-115.
World Bank (2013), World Development Indicators 2013, World Bank, Washington D. C.
Ulfelder, J. (2007), “Natural-resource Wealth and the Survival of Autocracy”, Comparative Political Studies,
40(8), 995–1018.
Urdal, H. (2008), “Population, Resources, and Political Violence: A Subnational Study of India, 1956–2002”,
Journal of Conflict Resolution, Volume 52, Number 4, August, 590-617.
34
Recent Publications in the Series
nº Year Author(s) Title
183 2013 Daniel Zerfu Gurara and Mthuli Ncube Global Economic Spillovers to Africa- A GVAR Approach
182 2013 Abebe Shimeles and Andinet Delelegn Rising Food Prices and Household Welfare in Ethiopia:
Evidence from Micro Data
181 2013 John C. Anyanwu Determining The Correlates Of Poverty For Inclusive Growth
In Africa
180 2013 John C. Anyanwu Marital Status, Household Size And Poverty In Nigeria:
Evidence From The 2009/2010 Survey Data
179 2013 Douzounet Mallaye & Yogo Urbain
Thierry
Heterogeneity Of The Effects Of Aid On Economic Growth In
Sub-Saharan Africa: Comparative Evidences From Stable
And Post-Conflict Countries
178 2013 Cédric Achille Mbeng Mezui And Uche
Duru
Holding Excess Foreign Reserves Versus Infrastructure
Finance: What Should Africa Do?
177 2013 Daniel Zerfu Gurara A Macroeconometric Model for Rwanda
176 2013 Edirisa Nseera Medium-Term Sustainability of Fiscal Policy in Lesotho
175 2013 Zuzana Brixiová and Thierry Kangoye Youth Employment In Africa: New Evidence And Policies
From Swaziland
174 2013 Pietro Calice African Development Finance Institutions: Unlocking the
Potential
