Thread by @MichaelRoss7

My paper “What do we know about export diversification in oil-producing countries?” is just out in Extractive Industries and Society. I know the topic sounds obscure, but it’s critical for global climate politics & development. Here’s why.

Thread

By the way: here's an ungated copy. papers.ssrn.com/sol3/papers.cf…

Two reasons this matters.

1. it would help many people. 23 countries get over 50% of their export income from oil, gas, or coal: Saudi Arabia, Russia, Nigeria, Venezuela, Iran, Angola, etc. Many suffer from a version of the #resourcecurse. Diversification might help.

You can read more about the resource curse here.
sscnet.ucla.edu/polisci/facult…

Second, fossil fuel-producers are the biggest opponents of action on climate change. Look at the leaders of the 3 biggest oil & gas producers: Trump (US), Putin (Russia), and MBS (Saudi Arabia). Or the world’s biggest coal exporter: Australia’s Morrison.

All are politically backed by their country’s fossil fuel industry. All are blocking action on climate change both domestically and internationally.

Yes, there are short-run fixes for these problems. But what about the long-run? Can we politically defuse the fossil fuel industry by helping countries become less oil-dependent?

The economics literature has surprisingly little to say about this. In fact, economic data on the oil exporters is often missing or unreliable (as I explain in the paper). This makes it impossible to know the true scope of the problem.

My paper uses new IMF data that is far more complete and reliable than others. Since we know so little, the paper is descriptive. Which countries have diversified over the past 50 years? Is it a viable strategy for escaping the resource curse? For defanging the power of oil?

Here are the three big takeaways.

1. Things are getting worse in the oil exporting countries. In the 1960's lots of countries had highly-specialized economies. Today it’s just the oil exporters. This also makes them highly vulnerable to international price shocks.

2. The African oil states have worst records. Since 1970, the rest of Africa has grown more diversified, but Africa’s oil exporters have become more concentrated. I found no exceptions.

3. The only factor linked to better outcomes was less oil. Neither democracy, nor good institutions, nor larger domestic markets, mattered. The more oil countries have, the harder it is to diversify.

There are some exceptions – most notably Oman, Malaysia, and Colombia. But there are far more failures than successes, and explaining the latter is hard.

Bottom line: export diversification is a much tougher path for these countries than most people realize, and success has been rare.

All the more reason countries should not develop their oil resources in the first place. And for those of us who want to dilute the political power of the oil industry, diversification is rarely going to help.

Sorry, the "ungated" link in my original thread is not always permitting downloads. Here's a truly ungated link: dropbox.com/s/xt70d6kfoooc…

Sorry, the SSRN link doesn't work for everyone. Here's a better ungated link:
dropbox.com/s/xt70d6kfoooc…