Oiling Congress: Windfall Revenues, Institutions, and Policy Change in the Long Run

Presidents need to craft political support to push through policy changes. But even when new policies are socially desirable, they are not always politically feasible. This article shows that in resource-rich countries, presidents can use windfall revenues to obtain support for their policy agenda. Using Ecuador as a case study, I show that oil revenues and president-led policy changes have the same long-run trends (i.e. both variables are co-integrated); government expenditures link oil revenues and policy change in the short run; and more discretionary budget rules also increase president-led policy changes. In this country, presidents produced policy changes only when they benefited from high oil revenues. These findings contribute to the literature on policymaking in Latin America; they show that the fiscal context in which policymaking institutions operate shapes presidents’ ability to produce policy changes and their long-run patterns. The results also present a framework to study policymaking in resource-rich countries.