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In this study, we look at how oil price shocks affect the incidence of protests in a country and how the size of a country's shadow economy influences this relationship. Using panel data from 144 countries, from the period of 1991–2015, we find evidence that negative oil price shocks significantly increase protests in countries with small shadow economies. The effect dissipates as the size of the shadow economy increases and eventually vanishes in countries with a shadow economy representing more than 35% of gross domestic product. Our analysis departs from existing literature by emphasizing the moderating role of a shadow economy on the effects of negative oil shocks on the incidence of protests in oil-dependent economies. The results are robust to various specifications and their broader implications are discussed.
This paper examines the effect of weather shocks on violent crime using disaggregated data from Brazilian municipalities over the period 1991–2015. Employing a distributed lag model that takes into account temporal correlations of weather shocks and spatial correlation of crime rates, I document that adverse weather shocks in the form of droughts lead to a significant increase in violent crime in rural regions. This effect appears to persist beyond the growing season and over the medium run in contrast to the conventional view perceiving weather effects as transitory. To explain this persistence, I show that weather fluctuations are positively associated not only with agriculture yields, but also with the overall economic activity. Moreover, evidence shows the dominance of opportunity cost mechanism reflected in the fluctuations of the earnings especially for the agriculture and unskilled workers, giving credence that it is indeed the income that matters and not the general socio-economic conditions. Other factors such as local government budget capacity, (un)-employment, poverty, inequality, and psychological factors do not seem to explain violent crime rates.
We study the association between oil rents and tax revenues, highlighting the importance of the shadow economy (SE) as a moderating factor in this relationship. Declining oil rents may not lead to higher tax efforts in a state if the SE is sizable. Using a sample of 124 countries from 1991 to 2015, our panel data regression analysis illustrates the moderating role of the SE in the final effect of negative oil rent shocks on tax revenues. A decline in oil rents following negative oil price shocks ceases to have any significant positive impact on tax revenues in countries with an SE representing more than 35% of gross domestic product. The results are robust after controlling for country- and year-fixed effects, other determinants of tax revenues, and using a dynamic model.
This paper examines the behavior of dictators when faced by an imminent threat of being overthrown in oil abundant countries. In the short run, the dictator’s survival strategies is argued to be confined to public spending and repression, whereas the choice of their levels is conditional upon the intensity of the mass threat (i.e. civil protest vs. mass violence) and the size of oil wealth. The empirical results indicate a possibility of mixing between spending and repression, and that oil wealth allows for differences in their employed levels in face of the same threat. Using a dataset of authoritarian regimes in 88 countries from 1981 to 2006, I found that mass violence is handled through increasing both spending and repression, whereas civil protest is only met by repression. Furthermore, greater oil wealth is found to provide a wider fiscal space to relatively increase spending, but only at low and intermediate levels of mass threats. As the threats intensify, the effect of oil wealth dissipates and oil wealth dictatorships behave the same as their non-oil wealth counterparts.