Public Finance Choice and Citizens’ Involvement: The Resource Curse of Libya

Libya is an oil-dependent country that relies heavily on oil sales and neglects to use other public finance sources, besides being one of the highest corrupt governments worldwide. The study investigates the assumption that the Libyan government's significant reliance on oil revenues in a way that reduces citizens’ involvement leads to poor institution persistence and results in a resource curse. The study tests the relationship between oil revenue share of total revenue, multiple institutional indices, and resource course utilizing a dataset from 1984-2019.
The results indicate that the government's decision to increase reliance on oil revenues directly contributes to the resource curse and indirectly through a poor institution that prospers with decreasing financial burdens on citizens. Ultimately, the choice of government on public finance contributes to the poor institutions prevailing.