The Socio-Economic Impact of an Abrupt Loss of Oil: A Synthetic Control Approach in the Case of Sudan

Abstract

With the secession of South Sudan in 2011, the Republic of Sudan experienced a sudden loss of more than 70% of its oil reserves. Few countries have experienced such a dramatic macroeconomic adjustment within a short period of time. While earlier studies have explored the socio-economic impacts of oil discoveries, little is known about what happens in the case of an abrupt reversal of an oil windfall. We make use of the synthetic control method to isolate the effects of such an abrupt oil loss. We find little evidence of oil-induced socio-economic effects with the exception of higher unemployment.