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Managing Resource Revenues in Developing Economies

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  • Paul Collier
  • Rick Van Der Ploeg
  • Michael Spence
  • Anthony J Venables

Abstract

This paper addresses the efficient management of natural resource revenues in capital-scarce developing economies. It departs from usual prescriptions based on the permanent income hypothesis and argues that capital-scarce countries should prioritize domestic investment. Because revenue streams are highly volatile, governments should protect consumption from shocks by increasing it only cautiously. Volatility in domestic investment can be moderated by a buffer of international liquidity, but it is also important to structure investment processes to be able to cope efficiently with substantial fluctuations. To date, most of the resource-rich countries of Africa have not had investment rates commensurate with their rate of resource extraction.

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Bibliographic Info

Article provided by Palgrave Macmillan in its journal IMF Staff Papers.

Volume (Year): 57 (2010)
Issue (Month): 1 (April)
Pages: 84-118

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Handle: RePEc:pal:imfstp:v:57:y:2010:i:1:p:84-118

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References

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  1. John Thornton & Fabian Bornhorst & Sanjeev Gupta, 2008. "Natural Resource Endowments, Governance, and the Domestic RevenueEffort: Evidence from a Panel of Countries," IMF Working Papers 08/170, International Monetary Fund.
  2. Arvind Subramanian & Xavier Sala-i-Martin, 2003. "Addressing the Natural Resource Curse: An Illustration from Nigeria," IMF Working Papers 03/139, International Monetary Fund.
  3. Frederick Van der Ploeg, 2010. "Aggressive Oil Extraction and Precautionary Saving: Coping with Volatility," CESifo Working Paper Series 3038, CESifo Group Munich.
  4. Paul Collier & Benedikt Goderis, 2007. "Commodity Prices, Growth, and the Natural Resource Curse: Reconciling a Conundrum," Economics Series Working Papers WPS/2007-15, University of Oxford, Department of Economics.
  5. Alesina, Alberto & Tabellini, Guido, 1990. "A Positive Theory of Fiscal Deficits and Government Debt," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 403-14, July.
  6. Rabah Arezki & Frederick van der Ploeg, 2008. "Can The Natural Resource Curse Be Turned Into A Blessing? The Role of Trade Policies and Institutions," OxCarre Working Papers 001, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
  7. Tabellini, Guido & Alesina, Alberto, 1990. "A Positive Theory of Fiscal Deficits and Government Debt," Scholarly Articles 3612769, Harvard University Department of Economics.
  8. Jeffrey D. Sachs, 1981. "The Current Account and macroeconomic Adjustment in the 1970s," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 12(1), pages 201-282.
  9. Bernardin Akitoby & Thomas Stratmann, 2006. "Fiscal Policy and Financial Markets," IMF Working Papers 06/16, International Monetary Fund.
  10. Paul Collier & Benedikt Goderis, 2007. "Prospects for Commodity Exporters," World Economics, World Economics, Economic & Financial Publishing, PO Box 69, Henley-on-Thames, Oxfordshire, United Kingdom, RG9 1GB, vol. 8(2), pages 1-15, April.
  11. Collier, Paul & Venables, Anthony J., 2008. "Illusory Revenues: Tariffs in Resource-Rich and Aid-Rich Economies," CEPR Discussion Papers 6729, C.E.P.R. Discussion Papers.
  12. Timothy Besley, 2007. "The New Political Economy," Economic Journal, Royal Economic Society, vol. 117(524), pages F570-F587, November.
  13. Jan-Peter Olters & Daniel Leigh, 2006. "Natural-Resource Depletion, Habit Formation, and Sustainable Fiscal Policy: Lessons from Gabon," IMF Working Papers 06/193, International Monetary Fund.
  14. Frederick van der Ploeg & Steven Poelhekke, 2009. "Volatility and the natural resource curse," Oxford Economic Papers, Oxford University Press, vol. 61(4), pages 727-760, October.
  15. Jan-Peter Olters, 2007. "Old Curses, New Approaches? Fiscal Benchmarks for Oil-Producing Countries in Sub-Saharan Africa," IMF Working Papers 07/107, International Monetary Fund.
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