Reversal of fortune for political incumbents: Evidence from oil shocks

572/2021 Rabah Arezki, Simeon Djankov, Ha Nguyen and Ivan Yotzov

Using a new dataset of 198 national elections across 48 democracies, this paper is the first to systematically examine the effects of oil price shocks on incumbents’ political fortunes in developed oil-importing countries. We find that oil price increases systematically lower the odds of re-election for incumbents and increase the likelihood of changes in the ideology of the incoming government. These shocks are found to operate through lowering consumption growth.

Political Economy