Oil discoveries and innovation

This paper explores the effects of giant oil discoveries on innovation for a sample of 179 countries for the period 1975-2005. Evidence indicates that innovation activity slows down after oil discovery. Using a difference-indifferences design, we show that, on average, patent citations decline by 2.4% per year, and the number of actual patents slows down by approximately 2.5% per year. These results are consistent with the notion of the natural resource curse, a phenomenon where resource-rich economies have inferior growth performance relative to resource-poor economies. Cross-sectional analyses indicate that changes in innovation activities are greater in common law countries. We show that governance quality is a possible channel through which a decline in innovative activity occurs after a resource windfall.

Automated summary

This paper investigates the impact of major oil discoveries on innovation. The findings indicate that innovation activity slows down after oil discovery, particularly in common law countries. This could be due to the resource windfall leading to a decline in innovative activities.