Oil Price Fluctuations, Institutional Quality and Wellbeing in the Context of Oil-producing Nations

Abstract

Improving people’s well-being has taken center stage in public policy discourse and forms an essential ingredient in assessing the level of economic development of nations. Contextually, well-being encompasses having a good life, freedom of choice, health, good social relations, and security. In addition to other enablers, oil price and institutional quality have been linked as sources of wellbeing.  Though contradictory, there is still underreporting on the impact of oil price and institutional quality on well-being particularly for oil-producing countries. Thus, this study conceptualized well-being as the happiness Cantril ladder; institutional quality as the average of World Governance Indicators, and oil price as West Texas Intermediate. Utilizing a two-system GMM estimator for a panel dataset from the period 2006-2022, the findings of the study show that oil prices and institutional quality exert an weak improvement on well-being both in the long and short runs. In terms of income, we found a negligible drop in well-being as income increases in the long and short run. These finds suggest that being a resource-rich nation does not guarantee robust wellbeing of people. Based on the findings, it is imperative to highlight that individual well-being could be enhanced by allocating more oil revenue to projects that enable well-being and strengthening institutional frameworks that guarantees improvements in wellbeing.