Fuel Subsidies Limit Democratization: Evidence from a Global Sample, 1990–2014

Abstract

Oil wealth tends to impede democracy, but scholars disagree about both why and under what conditions. This note helps answer these questions by evaluating the field’s foundational theory of the rentier state, which claims that oil wealth finances generous societal benefits that reduce citizens’ demands for representation and hinder the emergence of democratic regimes. I create a new measure of such benefits, focusing specifically on the size of domestic gasoline subsidies in dollars per capita. I then use a global sample from 1990 through 2014 to demonstrate that greater spending on these subsidies significantly reduces the likelihood of a transition toward democracy. The impact on democratization is as consequential in practical terms as are large increases in the rate of economic growth. Moreover, including the measure of fuel subsidies helps account for the autocratic effect of oil income. I conclude by highlighting how this fuel subsidy data can shed light on a number of other political economy questions.