The Effects of Oil Revenues on Good Governance Indicator in Selected OPEC Member Countries

Indicator of good governance is one of the key factors in growth and development of countries. Oil revenues which are affecting government’s performance in oil-rich countries, posed a number of challenges such as low economic growth, poverty and lack of responsibility, corruption and lack of rule of law. The main objective of this study is to investigate the impact of oil revenues on good governance indicators in OPEC countries by using panel data approach over the period of 1996 - 2011. In this study, the arithmetic mean of corruption control, government effectiveness, regulatory quality, rule of law, voice and accountability and political stability indices are used as an indicator of good governance. Moreover, the impact of oil revenues on each component is separately investigated. The results indicate that oil revenues have a negative and significant effect on good governance indicator, due to its negative and significant effects on corruption control, political stability and voice and accountability indices. On the other hand, the oil revenues have negative impacts on government effectiveness and regulatory quality, and a positive impact on rule of law, but these impacts are insignificant.