Oil rents and patronage: the fiscal effects of oil booms in the Argentine provinces

Abstract

When do oil-dependent governments spend oil rents in expanding political machines through patronage and clientelism, as rentier theories claim, or in providing better public services? Using regression analysis for panel data and two case studies of the Argentine provinces (1983-2013), this study shows that infrastructure can rise and patronage decline during oil booms. When rents are high and the oil sector creates new jobs, incumbents tend to increase capital investment. They cannot compete with oil salaries and use infrastructure to cope with the sector's pressures for basic services. When rents decline in contexts of job destruction in the oil sector, and the rest of the private sector cannot absorb the layoffs, incumbents tend to increase patronage to contain social turmoil and secure core voters.