Are Developing Countries Better off Spending their Oil Wealth Upfront?
AbstractWe question the conventional view that it is optimal for government to maintain a stable level of spending out of oil wealth. We compare this conventional policy recommendation with one where government spends all of its oil revenues upfront, at the same rate as oil is extracted. Using a neoclassical growth model with positive external effects of public spending on consumption and productivity, we find that, if the economy is growing along the steady-state balanced path, the conventional view is validated. However, if the economy starts with a lower capital stock, the welfare ranking across two policies can be reversed.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 04/141.
Date of creation: 01 Aug 2004
Date of revision:
Contact details of provider:
Postal: International Monetary Fund, Washington, DC USA
Phone: (202) 623-7000
Fax: (202) 623-4661
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-10-22 (All new papers)
- NEP-DEV-2005-10-22 (Development)
- NEP-ENE-2005-10-22 (Energy Economics)
- NEP-MAC-2005-10-22 (Macroeconomics)
- NEP-PBE-2005-10-22 (Public Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Clark A. Burdick, 1997. "A transitional analysis of the welfare cost of inflation," Working Paper 97-15, Federal Reserve Bank of Atlanta.
- Khan, Mohsin S. & Reinhart, Carmen M., 1990.
"Private investment and economic growth in developing countries,"
Elsevier, vol. 18(1), pages 19-27, January.
- Reinhart, Carmen & Khan, Mohsin, 1989. "Private investment and economic growth in developing countries," MPRA Paper 13655, University Library of Munich, Germany.
- Kneller, Richard & Bleaney, Michael F. & Gemmell, Norman, 1999. "Fiscal policy and growth: evidence from OECD countries," Journal of Public Economics, Elsevier, vol. 74(2), pages 171-190, November.
- Paul Cashin, 1994.
"Government Spending, Taxes, and Economic Growth,"
IMF Working Papers
94/92, International Monetary Fund.
- Nigel James Miller & Christopher Tsoukis, 2001. "On the optimality of public capital for long-run economic growth: evidence from panel data," Applied Economics, Taylor & Francis Journals, vol. 33(9), pages 1117-1129.
- Khan, Mohsin S & Kumar, Manmohan S, 1997. "Public and Private Investment and the Growth Process in Developing Countries," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 59(1), pages 69-88, February.
- Aschauer, David Alan, 1989.
"Is public expenditure productive?,"
Journal of Monetary Economics,
Elsevier, vol. 23(2), pages 177-200, March.
- 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.
- Issouf SamakÃ© & Priscilla S. Muthoora & Bruno Versailles, 2013. "Fiscal Sustainability, Public Investment, and Growth in Natural Resource-Rich, Low-Income Countries," IMF Working Papers 13/144, International Monetary Fund.
- Toto Same, Achille, 2009. "Transforming natural resource wealth into sustained growth and poverty reduction : a conceptual framework for Sub-Saharan African oil exporting countries," Policy Research Working Paper Series 4852, The World Bank.
- Tsani, Stella, 2013. "Natural resources, governance and institutional quality: The role of resource funds," Resources Policy, Elsevier, vol. 38(2), pages 181-195.
- Christine J. Richmond & Irene Yackovlev & Shu-Chun S. Yang, 2013. "Investing Volatile Oil Revenues in Capital-Scarce Economies," IMF Working Papers 13/147, International Monetary Fund.
- Jan-Peter Olters & Daniel Leigh, 2006. "Natural-Resource Depletion, Habit Formation, and Sustainable Fiscal Policy," IMF Working Papers 06/193, International Monetary Fund.
- Torfinn Harding & Frederick Van der Ploeg, 2009. "Is Norway's Bird-in-Hand Stabilization Fund Prudent Enough? Fiscal Reactions to Hydrocarbon Windfalls and Graying Populations," CESifo Working Paper Series 2830, CESifo Group Munich.
- Reda Cherif & Fuad Hasanov, 2012. "Oil Exporters' Dilemma," IMF Working Papers 12/4, International Monetary Fund.
- Antonio Spilimbergo, 2005.
"Measuring the Performance of Fiscal Policy in Russia,"
IMF Working Papers
05/241, International Monetary Fund.
- Antonio Spilimbergo, 2007. "Measuring the Performance of Fiscal Policy in Russia," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 43(6), pages 25-44, November.
- Alonso Segura, 2006. "Management of Oil Wealth Under the Permanent Income Hypothesis," IMF Working Papers 06/183, International Monetary Fund.
- Toto Same, Achille, 2008. "Windfall management for poverty reduction : improving public finance Management-the case of Chad," Policy Research Working Paper Series 4596, The World Bank.
- Peter Wierts & Guido Schotten, 2008. "Dutch natural Gas Revenues and Fiscal Policy: Theory versus Practice," DNB Occasional Studies 605, Netherlands Central Bank, Research Department.
- Juliana Dutra Araujo & Grace Bin Li & Marcos Poplawski-Ribeiro & Luis-Felipe Zanna, 2013. "Current Account Norms in Natural Resource Rich and Capital Scarce Economies," IMF Working Papers 13/80, International Monetary Fund.
- Toto Same, Achille, 2008. "Mineral-rich countries and dutch disease : understanding the macroeconomic implications of windfalls and the development prospects-the case of Equatorial Guinea," Policy Research Working Paper Series 4595, The World Bank.
- Jean-Luc HÃ©lis & Teresa DabÃ¡n SÃ¡nchez, 2010. "A Public Financial Management Framework for Resources-Producing Countries," IMF Working Papers 10/72, International Monetary Fund.
- Cherif, Reda & Hasanov, Fuad, 2013. "Oil Exporters’ Dilemma: How Much to Save and How Much to Invest," World Development, Elsevier, vol. 52(C), pages 120-131.
- StÃ©phane Carcillo & Mauricio Villafuerte & Daniel Leigh, 2007. "Catch-Up Growth, Habits, Oil Depletion, and Fiscal Policy," IMF Working Papers 07/80, International Monetary Fund.
- Jiří Sýkora, 2013. "Oil in Timor-Leste: A Ticket to Prosperity?," Acta Oeconomica Pragensia, University of Economics, Prague, vol. 2013(3), pages 68-85.
- Jens R. Clausen, 2008. "Calculating Sustainable Non-Mineral Balances As Benchmarks for Fiscal Policy," IMF Working Papers 08/117, International Monetary Fund.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow) or (Hassan Zaidi).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.