final research proposal paper - oil & venezuela-04.29.16

Running head: Final Research Proposal Paper-04/29/16 KENNEDY 1

Research proposal paper: “How has the Oil Industry Impacted the Distribution of Income & Wealth in Venezuela?”

Edward O. Kennedy, Jr.

LAS 6934-Spring 2016

Professor Miguel Cruz

April 29, 2016


Abstract: This research project proposal will analyze and explore the relationship

between the oil industry in Venezuela since its inception in the early 20th century and the

distribution of income and wealth in that country, as compared to other Latin American

countries without this commodity. It will argue that the oil industry’s impact has been

detrimental to equality because of corruption in public administration and the overdependence

of the Venezuelan economy on one export, namely, oil. Therefore, as the oil industry’s presence

in Venezuela (the cause) increased, the inequitable distribution of income and wealth increased

(the effect).

Keywords: Venezuela, oil industry, PDVSA, national income, national wealth

Introduction

During my first visit to Caracas, Venezuela in 2006, the grimy, poverty-stricken

appearance of the shantytowns, or ranchos, covering the mountainsides all around the capital

city immediately stunned me as my wife and I were driving from the airport. Ranchos is a

sarcastic term that was coined to describe Caracas’ slums. A rancho is a nice, peaceful, pretty

farm in a rural area. These slums are anything but that. I learned later that some of these areas

are so crime-infested that not even the police, who have their own issues with corruption, will

not go there. On the other hand, other areas of Caracas, such as Chacao, appeared to be quite

prosperous and socioeconomically middle-class or above. I have been to Costa Rica many times

and while its capital city, San José, is far from being a beautiful and poverty-free metropolis, it

does not have the same high level of obviously poor slums as Caracas.


As we were driving, I kept wondering why a country like Venezuela with its precious

natural resources, arable land, good climate, advantageous geographical location, human capital,

and other assets, would have such a wide dispersion of socioeconomic neighborhoods?

Venezuela’s main export, oil, should provide a larger share of its citizens with a better standard

of living, or so I thought. Costa Rica has no oil at all, but it appears to me to have more of a

solid middle class than Venezuela does. What could be causing this paradox? What are other

Latin American countries without an oil industry, like Costa Rica, doing that Venezuela is not

doing, or conversely, what is Venezuela doing that other Latin American countries are not doing

to cause this to happen over years? I propose to answer that question, among others, with this

research project. Specifically, “How has the Oil Industry Impacted the Distribution of Income &

Wealth in Venezuela?” With my research, I intend to prove that the impact has been negative. In

other words, my hypothesis is that there is an inverse relationship between the presence of the oil

industry in Venezuela and equality in the distribution of income and wealth. I believe this

research is relevant and important so that what we learn from “mistakes” made in Venezuela can

be generalized to other Latin American countries or possibly even to other countries of the world

with or without a prominent oil industry. I would hope that future researchers would even extend

my research to countries that are overly dependent on one or a few natural resources or

commodities other than oil.

The proposal paper will begin with a literature review that I have conducted during my

research. I will comment on what research there is available on this topic, whether or not my

research agrees with it, where prior research is incomplete, and how my research fills the gaps.

The literature review will also discuss any controversies among prior researchers’ findings, what


research designs they employed, and how my research contributes to the scholarly body of

knowledge they have already provided.

The next section will explain my research methodology, whether I will use quantitative or

qualitative methods, or both. I will also describe any ethnographic research that I might use to

gather data in order to answer my research question, surveys, structured or non-structured

interviews, and other research design methods. In this section, I will describe and define my

research subjects, units of analysis, variables, indicators, and measurement instruments.

The appendix will include an example of one of my measurement instruments.

I truly believe that there can be another Venezuela; a more just, healthier, safer, and more

socioeconomically equal country. I propose that my research project, in some small way,

contributes to reaching that, so far, elusive goal.

Systematic Review of the Literature

Purpose and Scope of this Review

My research question, at this point in the process of my research proposal, is, “How has

the oil industry in Venezuela affected the distribution of income and wealth in that country?”

Therefore, the underlying theme of my research project will be in the field of Economics and I

will do primarily a quantitative research project. However, I do not want simply to crunch

numbers, which previous researchers have already done. By finding an answer to my research

question, I hope to add to existing knowledge, to revise prior research, or both.

The primary purpose and scope of this literature review will be to read, analyze, and

synthesize as much scholarly work that is available on my research project as possible to get an

overview of other scholars’ work and to make myself an expert in a field in which I am, so far,

unfamiliar. That being the case, I hope that, by reviewing any existing literature, I will learn


some fresh ideas I have not thought of before and that I can use in my own research and to

stimulate my thinking. I will also use existing knowledge to study my research question.

Ancillary purposes of the literature review will be to discover any inaccuracies,

deficiencies, flaws, and/or gaps in prior research so that my research can correct the blunders and

fill in the gaps. As Jeffrey Knopf says in his article, “Doing a Literature Review”, “Its purpose

is to help show how your final conclusions relate to the prior wisdom about your subject”

(Knopf, 2006, p. 130). The purpose of my review, then, will not be the review as an end in and

of itself, but only a preliminary step in the development of my research project.

Search for Relevant Material

A crucial component of the design of any research project is that it be replicable at all of

its various stages, including the literature review. Any other researchers must be able to easily

locate the literature I found so that they can read it themselves and decide whether they agree

with my review of said literature. Therefore, in this stage of the literature review, I employed

and will employ further as my research project advances, a combination of keywords to search

for on-line books and academic journal articles related to my topic. I will do much of my search

on the Florida International University Library website, but I will also search other sources, such

as the Latin American Studies Association, the Social Sciences Citation Index (SSCI), Latin

American Public Opinion Project (LAPOP), the website of the Economy Ministry of Venezuela,

and such well-known, highly reputable sources. On the other hand, my search will include not

only peer-reviewed journals, but also other sources of information not reviewed by colleagues

for ideas and thoughts that I otherwise would miss. Alan Bryman, in his textbook “Social

Research Methods”, dubs these sources “’grey literature’ (for example, conference papers and

reports by various bodies)” (Bryman, 2012, p. 115). Knopf refers to this type of search as


“casting your net widely” (Knopf, 2006, p. 128). He wisely recommends the researcher also

look to “government agencies, international governmental organizations, non-governmental

organizations, think tanks, and independent, freelance researchers” (Knopf, 2006, p. 128).

Appraisal of relevant material found to date

In my search for relevant material so far, I have discovered that many academics and

other interested parties have done considerable research on the development of the oil industry

and its impact on the macro economies of oil-producing countries, such as its influence on GDP

per capita. However, GDP per capita, by definition, is an average of national income and tells us

nothing about its distribution among socioeconomic groups within Venezuelan society.

Below are some examples of journal articles that I have found in my literature search.

“The Politics of Institutional Change in Venezuela: Oil Policy during the Presidency of Hugo

Chávez”, by Coleman Wiseman of the University of Calgary and Daniel Béland of the

University of Saskatchewan. According to their abstract, the article “explains institutional

change in Venezuela’s state-owned oil company, PDVSA (Petróleos de Venezuela, S.A.), and

Venezuelan oil policy since the election of Hugo Chavez in December 1998.” (Wiseman &

Béland, 2010, p. 141). The authors also state in their abstract that “the article draws on 21 semi-

structured interviews conducted in late 2006 with actors who were directly involved in the

management of PDVSA and the development of Venezuelan oil policy over the last 40 years.”

(Wiseman & Béland, 2010, p. 141). The article was published in the Canadian Journal of Latin

American and Caribbean Studies in July 2010 and I obtained it on FIU’s Green Library “HAPI”

website. I will scrutinize this article carefully to verify whether the authors followed social

research ethical principles in their interviews of participants in their survey. If any ethical

principles were broken or “bent”, the authors’ conclusions could be in doubt.


Another article I read was “Oil exploitation and the environmental Kuznets curve”, by

Abdoulkarim Esmaeili and Negar Abdollahzadeh. The journal “Energy Policy” published this

article and I obtained it on the FIU Library website. According to their abstract, the authors

analyze the impacts of oil exploitation on a nation’s human development and sustainable

development. They state in their abstract “increased freedoms and a better income distribution

will reduce the rate of oil exploitation. Thus, policies aiming at enhancing democratic society

and better income distribution would be more compatible with sustainability” (Esmaeili and

Abdollahzade 2009, p. 371). The authors use a quantitative approach in their research design, so

their methods and their research questions are in the same neighborhood as mine. I hope to add

more knowledge to what they have already found out.

I also read a review of “The Nationalization of Venezuelan Oil”, by James F. Petras, Morris

Morley, and Steven Smith. This article was published in “The Hispanic American Historical

Review” and I obtained it in FIU Library’s website. According to the book review,

“Unfortunately, the study is so shallow in its historical analysis and so crudely deductive in its

approach to Venezuelan society and politics, that it is sure to leave readers, even those convinced

already of the value of class analysis, very dissatisfied” (Petras, Morley, & Smith 1980, p. 750).

If the book reviewers were to be believed, then the only reason I would consult this book as a

source would be to find out how not to do research on my topic. In any literature review, it is

important for the researcher to know what material that is out there might be deficient in some

way.

To reiterate, my research question is, “How has the Oil Industry Impacted the

Distribution of Income & Wealth in Venezuela?” It is my hypothesis that the impact has been

negative, in other words, that there is a causal but inverse relationship between two variables.

http://www.sciencedirect.com.ezproxy.fiu.edu/science/article/pii/S0301421508004229




One indicator of the independent variable is the presence, or absence, of the oil industry

in Venezuela and one indicator of the dependent variable is the distribution of income and wealth

in that country. I will explain indicators, variables, and other components of my research further

in this paper.

Research Methods

Basic research design

My purpose in this research proposal is not to examine the effect of the oil industry on the

overall macroeconomy of Venezuela. Many other scholars have done that and I believe it is

evident from that research that the oil industry has made significant contributions to Venezuela’s

economic growth. It is not my intention to add to that valuable research, but I will use it as

extant material with which to answer my research question. My purpose is to study how those

increases in economic growth have been distributed among the socioeconomic classes of the

nation, not the growth itself. Using both extant and my own research conducted specifically for

this project, I will be conducting a primarily quantitative analysis, with a relatively small

qualitative component. In other words, my approach will primarily be a deductive one.

According to Alan Bryman in his textbook “Social Research Methods-4th edition”, deductive

reasoning is “an approach to the relationship between theory and research in which the latter is

conducted with reference to hypotheses and ideas inferred from the former” (Bryman, 2012, p.

711). This is indeed the design of my research proposal.

As far as ethnographic/participant observation work is concerned, my personal

circumstances will not allow this type of research. I will neither be carrying out any in-person

interviews, structured, non-structured, or otherwise. However, I have designed a multiple-choice

questionnaire survey that will be mailed out to a sample of Venezuelan households.


In summary, my research project will be composed of two main components: analysis of

existing economic data and the survey questionnaire designed specifically for this project. Later

on in this paper, I will explain the methodology I used to design the survey, the questions

included in the survey, and how I selected the subjects for the sample of Venezuelan households.

Subjects

Quantitative Sampling

Since my subjects are located in Venezuela, it would not feasible for me to do in-person

interviews. The cost of travel would be too high and, from a safety standpoint, I would not

personally feel very secure in Venezuela at this time. In addition, the ethical issues would be

difficult to overcome, since the personal safety of any PDVSA employees or former employees

that I might want to interview could be placed at risk from reprisals from PDVSA management.

In addition, for both indicators, but especially PDVSA employees, it would be tempting to be

covert, and not reveal the true purpose of my research, in order to attempt to convince the

subjects to be more open in their answers. This is another thorny ethical issue involving lack of

informed consent. Of course, personal interviews open the door for sampling error. I know

myself, and I know that I would choose only those neighborhoods of Caracas where I would feel

relatively safe in order to conduct in-person interviews. For all of these reasons, I have

eliminated personal interviews from my research design.

To begin choosing my subjects, I will have to consider what my sampling frame is. In

my case, I believe the sampling frame would be Venezuelan households since the discovery of

oil in Lake Maracaibo in the 1920s until the present. I will obtain some of this information from


census data. My sample size will have to be considerably smaller than this since many

households that existed in the 1920s more than likely no longer do exist.

Since I have eliminated personal interviews from my research design, I am considering

the possibility of performing multi-stage cluster sampling. The details of such a sample have yet

to be determined, but such a design would eliminate or minimize some sampling errors, cost, and

ethical issues. Within the multi-stage sample, I would also include some stratification elements

such as geographical regions of Venezuela, cities of a certain population within those regions,

and neighborhoods within those cities. This survey cannot be completely random sampling, but

will essentially be purposive sampling, since I would want households of varying socioeconomic

levels to participate in the survey.

Measurement

Variables

As I began thinking about this research project, I first had to consider what the indicators

of the independent variable were. The indicator for this side of the cause/effect relationship (the

cause) is the presence (or not) of the oil industry and, therefore, the independent variable itself is

barrels of oil produced. This data should be relatively easily to obtain on the website of the

Economy Ministry of Venezuela and/or the website of Petróleos de Venezuela, S.A. (PDVSA),

the state-owned oil company.

On the other side of the cause/effect relationship (the effects), I have made a list of the

indicators of the dependent variable, which is the distribution of income and wealth in

Venezuela:

Human Development Index (HDI) Gini coefficients Type of housing lived in, i.e., rent or own Number and types of household appliances in the home


Annual household income Number of automobiles owned by the family Area of Venezuela where household resides Area of Caracas where household resides Savings accounts Investment accounts Generational social mobility Annual amount of leisure/vacation time available Theft of electricity in Venezuela’s ranchos

Some of these indicators, such as “area of Venezuela where household resides”, “theft of

electricity in ranchos” must be operationalized into variables that can be measured and used in a

cause/effect analysis, such as linear regression. In my reading of the literature, I found an article

on the Interamerican Dialogue’s website. This article mentions an index called the “Bertelsmann

Stiftung Transformation Index” (BTI), which “analyzes and evaluates the quality of democracy,

a market economy and political management in 129 developing and transition countries. It

measures successes and setbacks on the path toward a democracy based on the rule of law and a

socially responsible market economy. The BTI is the first cross-national comparative index that

uses self-collected data to comprehensively measure the quality of governance during processes

of transition” (Interamerican Dialogue April 26, 2016). While this index is not applicable to my

research project, I would like to work with Florida International University’s Graduate School

Statistical Consulting Department to develop an index that will combine all of the indicators and

measure my dependent variables not only longitudinally within Venezuela, but also cross-

nationally throughout Latin America. The analysis can then compare the indices of Latin

American countries with an oil industry with those without an oil industry. By working closely

with FIU’s Statistical Consulting Department, I will feel more confident that the variables will

have measurement validity, that is, that they truly measure the distribution of income and wealth

in Venezuela instead of some other concept.


Measurement Instruments

As mentioned previously in this paper, this proposal does not include qualitative research

instruments such as participant observation, structured or semi-structured interviews, or focus

groups. I will be using primarily available data and a survey questionnaire with which to execute

a regression analysis. Any instruments used by any researcher must be employed in such a way

that the entire research project is replicable, reliable, and valid. My project must be subject to

being able to be repeated by any other researcher in order for it to be replicable, which is “the

degree to which the results of a study can be reproduced” (Bryman, 2012, p. 715). If another

researcher repeats my process and gets different results, then the validity of my entire project is

in doubt. The instruments I use must also have reliability, which is “the degree to which a

measure of a concept is stable” (Bryman, 2012, p. 715). If I perform the same research methods

many times, with the same instruments, the same research design, and the same procedures, but

get widely different results, the entire project is again dubious.

Data Collection Methods

I will be using available data that can be found in well-known, reputable sources such as

the FIU Library’s “HAPI” website, the FIU brick-and-mortar library, the Latin American Studies’

Association website, Vanderbilt University’s Latin American Public Opinion Project (LAPOP),

and other reliable sources. My unit of analysis is the country of Venezuela, which I will examine

longitudinally over decades and as a case study cross-nationally with other Latin American

countries. In other words, I will collect data while keeping in mind that this is an explanatory

research project, not just a descriptive one. According to Royce Singleton & Bruce Strait’s

textbook “Approaches to Social Research”, “Explanatory surveys investigate relationships

between two or more variables and attempt to explain these in cause-and-effect terms” (Singleton


& Straits, 2010, p. 267). I will use this data to perform a secondary analysis by combining the

data with my own survey questionnaire. This process will help to reduce the size of the sample

of the survey since data from previous surveys already exists.

The survey questionnaire that was designed specifically for this research project is

included in the Appendix. While thinking about the design, I considered open questions, but

decided these would be more suitable for a qualitative research project, so I came to the decision

to use closed and direct, rather than indirect, questions. Moreover, according to Bryman, closed

questions offer the following advantages:

Easy to process answers Enhance the comparability of answers Closed questions may clarify the meaning of a question for

respondents Easier for interviewers and/or respondents to complete

I tried to link the questions on the survey as much as possible to my research question in

order to avoid measuring something else other than my research question. I also avoided

ambiguous terms, long questions, double-barreled questions, very general questions, and leading

questions so that the survey will not be biased. In addition, avoiding these types of questions

will reduce reactive measurement effects, where the respondent tends to provide socially

acceptable answers. The existing survey data and my survey data will be trend surveys in that

they will measure general social changes over time within Venezuela. Furthermore, I will

compare those social changes with similar indicators in other Latin American countries. To

provide respondents with a range of choices for their answers, I used a Likert scale for most of

the questions rather than “Yes” or “No”.

In conclusion, I would hope that this research proposal, if carried to fruition, might be of

use in public policy-making in those countries suffering the paradox of being rich in natural


resources but poor in the public administration of those resources, specifically Venezuela.

Former President of Peru Alejandro Toledo put it very eloquently in his book “The Shared

Society: A Vision for the Global Future of Latin America”, when he declared, “For the rest of the

days that God gives me, I have decided to dedicate my life to fighting with the force of my

convictions to free people from poverty and inequality in Latin America and in the world, while

defending my belief in democracy, freedom of the press, and human rights” (Toledo, 2015, p.

244). Bravo!


Appendix

Survey of Citizens of Venezuela—Multiple Choice Questionnaire

Instructor: José Miguel Cruz Name: Ed Kennedy

Class: LAS 6934 Date: 04/29/16

Instructions

Please read each question carefully and then, unless otherwise instructed, select your answer by writing the letter in the space provided that most closely matches your feelings on the topic of the question.

1) How much time do you spend each week waiting in line to buy groceries?

a. One hour

b. Two Hours

c. Three Hours

d. Four or more hours

2) What was your annual household income from all sources last year?

a. Less than 50,000 Bolívares

b. Between 50,000 Bolívares and 74,999 Bolívares

c. Between 75,000 Bolívares and 99,999 Bolívares

d. 100,000 Bolívares or more

3) Including yourself, how many people live in your house?

a. One

b. Two

c. Three

d. Four or more

4) How many autos are available for your household to use on a daily basis?

a. One

b. Two


c. Three

d. Four or more

5) Do you have a bank account, i.e., checking and/or savings?

a. Yes

b. No

6) How often do you go out to the movies?

a. More than once a week

b. 2 or 3 times a month

c. Once a month

d. A few times a year

e. Less than once a year

7) What is the highest level of education you have completed?

a. 8th grade or less

b. Between 1 and 4 years of high school, but did not graduate

c. Graduated from high school

d. 1 or more years of college but did not graduate

e. College graduate or more

8) Which of the following best describes your job status at this time?

a. Unemployed

b. Working part time (1 – 39 hours per week)

c. Working full time (40 hours per week or more)

9) What would you say about your household economic situation over the last 10 years?

a. It has remained about the same

b. It has improved a little


c. It has improved a lot

d. It has gotten a little worse

e. It has gotten a lot worse

f. Not sure

10)

In your opinion, prioritize the following serious issues faced by our country. Place a number to the left of the issue (1 = most serious; 10 = least serious)

a. Inflation

b. Lack of potable water

c. Crime

d. Environmental issues

e. Unemployment

f. Corruption

g. Education (lack of in my area)

h. Education (bad quality)

i. Gangs

l. Poverty

11)Do you typically engage in the following activities in your household? (Circle the letter

for all that apply)

a. Listen to news on the radio

b. Watch news on TV

c. Read news in a newspaper

d. Read news on the Internet

12) How would you describe the current general economic situation of Venezuela?

a. Very good

b. Good


c. Neither good or bad

d. Bad

e. Very bad

13)How would you compare the current general economic situation of Venezuela with 12

months ago?

a. It is much better now

b. It is somewhat better now

c. It is about the same

d. It is somewhat worse now

e. It is much worse now

14) How would you describe your own current economic situation?

a. Very good

b. Good

c. Neither good or bad

d. Bad

e. Very bad

15) How would you compare your own current economic situation with 12 months ago?

a. It is much better now

b. It is somewhat better now

c. It is about the same

d. It is somewhat worse now

e. It is much worse now

16)In order to resolve a household economic problem, have you ever asked help from…? (Circle the letter for all that apply)

a. National Assembly

b. Local authority (town/city council)

c. Mayor’s office

d. None of the above


17)Taking into account the existing economic resources of the country, to whom would you allocate more tax revenues?

a. Much more to the Federal government.

b. Somewhat more to the Federal government.

c. The same quantity to municipal & Federal governments

d. Somewhat more to the municipal government.

e. Much more to the municipal government.

18) In general, how satisfied are you with your daily life?

a. Very satisfied

b. Somewhat satisfied

c. Somewhat dissatisfied

d. Very dissatisfied

19)

If either you or any member of your household are enrolled in either elementary school, high school, or a university, how/where do you typically study? (Place a letter in the space provided for the activity/place that you use the most.)

20) Do you or any member of your household own or rent the residence in which you reside?

a. On the internet on a computer at home

b. On the internet in a public library

c. Reading physical textbooks at home

d. Reading textbooks in a public library

a. Own

b. Rent


References

Knopf, Jeffrey W. (2006). Doing a Literature Review. PSOnline www.apsanet.org

Bryman, Alan. (2012). Social Research Methods, fourth edition. New York: Oxford University Press

Wiseman, C. and Beland, D. (2010). The Politics of Institutional Change in Venezuela: Oil Policy during the Presidency of Hugo Chávez. Canadian Journal of Latin American and Caribbean Studies. FIU Library website

Esmaeili, A. and Abdollahzadeh, N. (2009). Oil exploitation and the environmental Kuznets curve. Energy Policy. FIU Library website

Evans, Peter. (1980). Review of ‘The Nationalization of Venezuelan Oil’. The Hispanic American Historical Review

Interamerican Dialogue. The Dialogue. On-line. April 26, 2016

Singleton, Royce and Straits, Bruce. (2010). Approaches to Social Research-5th edition. New York: Oxford University Press

Toledo, Alejandro. The Shared Society: A Vision for the Global Future of Latin America Stanford, CA. Stanford University Press



http://www.apsanet.org/

final research proposal paper - oil & venezuela-04.29.16

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