An immediate resource curse? The effect of oil discovery on Guyana's democratic trajectory

This study investigates the recent oil boom in Guyana and its political ramifications. It questions whether the 2015 oil discovery had any effect on the country’s short-term democratic governance, thereby addressing a gap in the natural resource literature regarding the relationship between oil wealth and democracy, a relation that, while well-documented in the long term, remains ambiguous in the short term. To effectively isolate the impact of the discovery and ensure a precise estimation of the oil discovery effect, I employ the Synthetic Control Method (SCM) to construct a counterfactual trajectory for Guyana’s Liberal Democracy Index (LDI) ranging the period from 2006 to 2023. The analysis reveals that the oil discovery reduced Guyana’s LDI by 0.124 points, representing a decline of approximately 28% relative to the counterfactual scenario. This result was validated through placebo studies, indicating that the effect observed in Guyana is non-trivial and cannot be attributed to mere mathematical coincidence.