Human Resources Development and the Structure of Oil Economies: Critical Issues with Illustration from Kuwait

Oil economies have unique structural characteristics that present challenges to mainstream economic policies. This paper examines the relevance of some of the conventional economic and human resources policies being proposed for the oil economies. A case is presented to illustrate that many of these policy recommendations are not based on an adequate understanding of the institutional structure of these countries and the unique characteristics of their resource base. They focus on short-term issues. First, the paper identifies the special institutional and resource characteristics of oil economies, and illustrates how they lead to contradictory policy objectives and examines the constraints they impose on the political economy of policy formulation. The paper then presents an empirical illustration of the medium-term policy prescriptions. The findings are based on a dynamic Computable General Equilibrium (CGE) Economy-Wide Model applied to the case of Kuwait. Regardless of the policy scenarios, the basic imbalances do not fade away over time. The paper concludes with an outline for an integrated long-term human resources and development vision for an oil economy in transition.