The @Oxford_CSAE conference has gone virtual, on twitter! Here's what I was gonna present: "The oil nouveau riche and arms imports". Thread for #DIYCSAE -->

There's been a bunch of new discoveries of natural resources in several African countries during 2000s, e.g. Tanzania, Ghana, Mozambique, Ethiopia, Uganda. Good news or same old resource curse?

Mozambique was one of the exploration "lottery winners". It found natural gas reserves off its coast worth around 50 times its GDP.

This was good news at first. It even led to a pre-boom boom in FDI. We wrote a paper about it with @GerhardToews: http://pierrelouisvezina.weebly.com/uploads/2/3/4/2/2342194/bonanzas_remix_2018.pdf. Here's an @The_IGC blog about it: https://www.theigc.org/blog/multiplier-effect-mozambiques-natural-gas-discovery-fdi-bonanza/

But it was short-lived... And the presource curse hit. The debt exploded, FDI stopped, foreign aid stopped... what happened?

It turned out the government had borrowed too much, and illegally, to purchase military ships.

And this was a big fraud to siphon newly available wealth, based on future gas revenues, by a handful of gangsters.

After this scandal I wondered, is there a pattern in the data? Are there often big arms deal after giant resource discoveries? That's what my new paper is about.

I look across developing countries since 1990, if giant discoveries lead to surges of arms imports. Giant discoveries are great because they act as unexpected shocks due to the uncertain nature of exploration. So their effects can be interpreted causally.

I find that in discovery countries, @SIPRIorg arms imports are about 2.5 times larger in the five years after the discovery, compared to the 5 years before. UN COMTRADE data suggests arms imports may be as much as 10 times larger.

Panel data estimates suggest that in the five years following a giant oil or gas discovery, arms imports increase by 25%. The effect is even larger when the oil price is high:

Azerbaijan is also a good case study:

And here's the timeline for 4 African countries. Arms imports do seem to follow giant discoveries of oil or gas.

So obvs, this has development implications, #ResourceCurse style. In Moz, the debt scandal, brought by the gov purchase of these unnecessary military ships led to a stop to foreign aid and even increases in poverty. ht: @shireen_mahdi

I paste my abstract below, along with my a concluding old tweet. And the paper is available here: http://pierrelouisvezina.weebly.com/uploads/2/3/4/2/2342194/arms_vezina_16032020.pdf. The end.

This paper has just been accepted for publication at the Journal of African Economies! I also wrote a summary on substack to try that out: https://vezina.substack.com/p/the-oil-nouveau-riche-and-arms-imports