Crude oil price and government effectiveness: The determinants of corruption in oil abundant states

Abstract

This research investigates the impact of crude oil price and government effectiveness on control of corruption measures in the oil abundant countries. By using a panel dataset of 18 oil‐producing countries from 2002 to 2017, and panel data regressions, the paper finds that crude oil price and government effectiveness can significantly decrease corruption in the oil‐producing countries. Besides, the findings show that crude oil prices with weaker governments can significantly increase corruption in oil‐producing countries. The results imply that crude oil prices with the institutions that control private investments, public funds, and public employment can significantly determine corruption in the oil abundant countries. In addition, the findings also substantiate rent‐seeking and patronage behaviors in the governments of oil abundant countries. The findings suggest that oil abundant countries must move further from rent‐seeking and patronage motives by promoting private investments in the non‐oil sectors, and create independent public services to reduce corruption. The paper suggests that the reforms should be pressured from international communities and policymakers to reduce corruption in oil abundant states.