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.

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.

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
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
Including yourself, how many people live in your house?
a. One
b. Two
c. Three
d. Four or more
How many autos are available for your household to use on a daily basis?
a. One
b. Two
c. Three
d. Four or more
Do you have a bank account, i.e., checking and/or savings?
a. Yes
b. No

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
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
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)
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

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
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
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

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
How would you describe your own current economic situation?
a. Very good
b. Good
c. Neither good or bad
d. Bad
e. Very bad
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
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

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.
In general, how satisfied are you with your daily life?
a. Very satisfied
b. Somewhat satisfied
c. Somewhat dissatisfied
d. Very dissatisfied
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

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