Oil Revenues, Institutions and Employment Capacities: Case Study of OPEC Member Countries

Abstract

This paper examines the impact of oil revenues and institutions on the capacity of job creation in member-countries of Organization of the Petroleum Exporting Countries (OPEC). The main research question is that how can be injecting unplanned oil revenues into the economy of OPEC members and through what channels and mechanisms lead to inflict the productive capacities of these countries and limit job creation in these economies. In this regard, the hypothesis of research highlights the negative impact of oil revenues in an inefficient institutional framework on job creation capacity of oil exporting country’s economy. Accordingly, due to the severe Interweaving conditions of economy and policy in petroleum exporting countries, the theoretical model used in this study is based on the doctrine of institutional economics and to estimate the model and to test the hypothesis, we use data for 12 OPEC member countries over the period 2002-2014 in a panel-data econometric model.The results indicate that abundance of oil revenues in OPEC countries with inefficient infrastructure and institutions leads to decline in employment capacity. Statistical evidence also confirms the de-capacitation of employment in the economies of OPEC member countries through channels such as undermining the quality of institutions and over-reliance on imports in these countries.Based on these evidence, we come to the point that inconsiderate infusion of oil revenues in OPEC member countries in an inefficient institutional framework, limits the capacity of employment and in this way, their opportunities to achieve economic growth have become a threat to their development and growth.

Keywords

• oil revenues
• institutions
• employment capacities
• organization of petroleum exporting countries (opec)