Revisiting the Oil Curse: Does Ownership Matter?

A large body of scholarship finds a negative relationship between oil abundance and economic growth. The existing empirical evidence on the oil curse, however, does not account for variations in the ownership of oil. This article investigates whether the effect of oil abundance on growth varies with ownership structures. It also investigates whether institutional quality influences the effect of different ownership structures. Using a novel database on ownership structures and employing a panel fixed-effects estimation method, it analyzes a sample of 20 oil-exporting developing countries during the period 1984-2005. The results show that different ownership structures have differential effects on growth, and that their effect is influenced by the quality of institutions. State ownership and control reduces growth when the institutional quality is poor, but increases growth when the institutional quality is good. Private ownership, on the other hand, increases growth when the institutional quality is poor, but reduces growth when the institutional quality is good. The results contrast the existing knowledge that institutional quality alone is decisive for the resource curse; the results show that the choice of ownership structure in the oil sector plays an important role in determining whether oil-exporting countries benefit from their oil wealth or suffer from the curse. The policy advice in this article is: retain state ownership and control if the institutions are strong, if the institutions are weak, transfer ownership to foreign oil companies.