When the Future's Uncertain and the End is Near - Assessing the Impact of Oil Price Shocks on Regime Survival

Abstract

This thesis will assess the impact of oil price shocks on regime survival. A large body of research into the inner workings of the «rentier states» finds oil dependency to cause political decay, low economic growth, and unstable regime configurations. Other studies find economic difficulties and crises to be a clear determinant for regime failure. The combined insights from these two fields of study suggest that oil price shocks should exert a negative effect on regime survival for oil producing regimes. No studies to date have investigated this relationship. While the existing empirical literature on oil wealth and regime survival generally finds oil wealth to increase regime survival, none of these studies account for price shocks. The absence of this assessment has left a gap in the research literature, and this thesis will take the first steps in bridging this gap. One of the reasons for this gap is the lack of sufficiently precise data. Since the oil price fluctuates from month to month, it would be di cult to observe the potential effects in observational data collected per year. By collecting and analyzing a new dataset, combining measures on political regimes with the monthly fluctuations of oil price, I am able to investigate this relationship with unprecedented resolution. Using the statistical technique of survival analysis, I find oil price shocks to decrease regime survival for oil producing regimes. The results presented are consistent across several model specifications and robustness tests. In addition to revealing several promising paths for further research on regime duration, the collected dataset will hopefully contribute to several other fields of study depending on data with higher resolution than ordinary observational datasets.