Oil revenues for public investment in Africa: targeting urban or rural areas?
AbstractThis paper investigates the effects of oil financed public investment on poverty using a dynamic multisectoral general equilibrium model featuring inter-temporal productivity spillovers, which may exhibit a sector-specific and regional bias. In general, the results bear out the expectation that a surge of oil revenues leads to a real appreciation, distorting incentives which favor nontradable activities over export agriculture and manufacturing thereby increasing rural and national poverty. Whereas this result is familiar from other recent studies, the simulations show that beyond the short run, when conventional demand-side Dutch disease effects are present, the relationship between resource-rent flows and real exchange rates, output growth, and poverty is less straightforward than simple models of the "resource curse" suggest. Taking Ghana as a stylized agriculture-based economy with poverty most pronounced in a region with home biased agricultural production, a policy mix of smoothing the real exchange rate shock and an allocation of infrastructure spending in rural areas seems to be the most promising public investment strategy to enhance growth and reduce poverty
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 Kiel Institute for the World Economy in its series Kiel Working Papers with number 1623.
Length: 31 pages
Date of creation: May 2010
Date of revision:
oil revenue; public investment; productivity; Africa; agricultural development; poverty;
Other versions of this item:
- Manfred Wiebelt & Rainer Schweickert & Clemens Breisinger & Marcus Böhme, 2011. "Oil revenues for public investment in Africa: targeting urban or rural areas?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 147(4), pages 745-770, November.
- H4 - Public Economics - - Publicly Provided Goods
- O5 - Economic Development, Technological Change, and Growth - - Economywide Country Studies
- Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
This paper has been announced in the following NEP Reports:
- NEP-AFR-2010-05-15 (Africa)
- NEP-ALL-2010-05-15 (All new papers)
- NEP-CMP-2010-05-15 (Computational Economics)
- NEP-DEV-2010-05-15 (Development)
- NEP-ENE-2010-05-15 (Energy 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.:
- David Aschauer, 1988.
"Is public expenditure productive?,"
88-7, Federal Reserve Bank of Chicago.
- Sachs, Jeffrey D & Warner, Andrew M, 1997.
"Sources of Slow Growth in African Economies,"
Journal of African Economies,
Centre for the Study of African Economies (CSAE), vol. 6(3), pages 335-76, October.
- Ram, Rati, 1996. "Productivity of public and private investment in developing countries: A broad international perspective," World Development, Elsevier, vol. 24(8), pages 1373-1378, August.
- Straub, Stephane, 2008.
"Infrastructure and growth in developing countries : recent advances and research challenges,"
Policy Research Working Paper Series
4460, The World Bank.
- Stephane Straub, 2008. "Infrastructure and Growth in Developing Countries: Recent Advances and Research Challenges," ESE Discussion Papers 179, Edinburgh School of Economics, University of Edinburgh.
- World Bank, 2005. "Economic Growth in the 1990s : Learning from a Decade of Reform," World Bank Publications, The World Bank, number 7370, March.
- Clemens Breisinger & Xinshen Diao & Rainer Schweickert & Manfred Wiebelt, 2010.
"Managing Future Oil Revenues in Ghana: An Assessment of Alternative Allocation Options,"
African Development Review,
African Development Bank, vol. 22(2), pages 303-315.
- Breisinger, Clemens & Diao, Xinshen & Schweickert, Rainer & Wiebelt, Manfred, 2009. "Managing future oil revenues in Ghana: An assessment of alternative allocation options," IFPRI discussion papers 893, International Food Policy Research Institute (IFPRI).
- Clemens Breisinger & Xinshen Diao & Rainer Schweickert & Manfred Wiebelt, 2009. "Managing Future Oil Revenues in Ghana - An Assessment of Alternative Allocation Options," Kiel Working Papers 1518, Kiel Institute for the World Economy.
- Gylfason, Thorvaldur, 2000.
"Natural Resources, Education, and Economic Development,"
CEPR Discussion Papers
2594, C.E.P.R. Discussion Papers.
- Gylfason, Thorvaldur, 2001. "Natural resources, education, and economic development," European Economic Review, Elsevier, vol. 45(4-6), pages 847-859, May.
- Antle, John M., 1984. "Human capital, infrastructure, and the productivity of Indian rice farmers," Journal of Development Economics, Elsevier, vol. 14(1), pages 163-181.
- Benin, Samuel & Mogues, Tewodaj & Cudjoe, Godsway & Randriamamonjy, Josee, 2008. "Reaching middle-income status in Ghana by 2015: Public expenditures and agricultural growth," IFPRI discussion papers 811, International Food Policy Research Institute (IFPRI).
- Lederman, Daniel & Maloney, William F., 2003. "Trade structure and growth," Policy Research Working Paper Series 3025, The World Bank.
- Gramlich, Edward M, 1994. "Infrastructure Investment: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1176-96, September.
- Usui, Norio, 1997. "Dutch disease and policy adjustments to the oil boom: a comparative study of Indonesia and Mexico," Resources Policy, Elsevier, vol. 23(4), pages 151-162, December.
- Davis, Graham A., 1995. "Learning to love the Dutch disease: Evidence from the mineral economies," World Development, Elsevier, vol. 23(10), pages 1765-1779, October.
- Canning, David, 1999. "Infrastructure's contribution to aggregate output," Policy Research Working Paper Series 2246, The World Bank.
- Bjornland, Hilde Christiane, 1998. "The Economic Effects of North Sea Oil on the Manufacturing Sector," Scottish Journal of Political Economy, Scottish Economic Society, vol. 45(5), pages 553-85, November.
- Fan, Shenggen & Zhang, Xiaobo & Rao, Neetha, 2004.
"Public expenditure, growth, and poverty reduction in rural Uganda,"
DSGD discussion papers
4, International Food Policy Research Institute (IFPRI).
- Shenggen Fan & Xiaobo Zhang, 2008. "Public Expenditure, Growth and Poverty Reduction in Rural Uganda," African Development Review, African Development Bank, vol. 20(3), pages 466-496.
- Christopher S. Adam & David L. Bevan, 2006.
"Aid and the Supply Side: Public Investment, Export Performance, and Dutch Disease in Low-Income Countries,"
World Bank Economic Review,
World Bank Group, vol. 20(2), pages 261-290.
- Christopher Adam & David Bevan, 2004. "Aid and the Supply Side: Public Investment, Export Performance and Dutch Disease in Low Income Countries," Economics Series Working Papers 201, University of Oxford, Department of Economics.
- Brunstad, Rolf Jens & Dyrstad, Jan Morten, 1997. "Booming Sector and Wage Effects: An Empirical Analysis on Norwegian Data," Oxford Economic Papers, Oxford University Press, vol. 49(1), pages 89-103, January.
- Thorvaldur Gylfason & Gylfi Zoega, 2002.
"Natural Resources And Economic Growth: The Role Of Investment,"
Working Papers Central Bank of Chile
142, Central Bank of Chile.
- Thorvaldur Gylfason & Gylfi Zoega, 2006. "Natural Resources and Economic Growth: The Role of Investment," The World Economy, Wiley Blackwell, vol. 29(8), pages 1091-1115, 08.
- Gylfason, Thorvaldur & Zoega, Gylfi, 2001. "Natural Resources and Economic Growth: The Role of Investment," CEPR Discussion Papers 2743, C.E.P.R. Discussion Papers.
- Thorvaldur Gylfason & Gylfi Zoega, 2001. "Natural Resources and Economic Growth: The Role of Investment," EPRU Working Paper Series 01-02, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
- Thorvaldur Gylfason & Gylfi Zoega, 2004. "Natural Resources and Economic Growth: The Role of Investment," DEGIT Conference Papers c009_011, DEGIT, Dynamics, Economic Growth, and International Trade.
- Breisinger, Clemens & Diao, Xinshen, 2008. "Economic transformation in theory and practice: What are the messages for Africa?," IFPRI discussion papers 797, International Food Policy Research Institute (IFPRI).
- Canning, David & Bennathan, Esra, 2000. "The social rate of return on infrastructure investments," Policy Research Working Paper Series 2390, The World Bank.
- Binswanger, Hans P. & Khandker, Shahidur R. & Rosenzweig, Mark R., 1993.
"How infrastructure and financial institutions affect agricultural output and investment in India,"
Journal of Development Economics,
Elsevier, vol. 41(2), pages 337-366, August.
- Binswanger, Hans P. & Khandker, Shahidur R & Rosenzweig, Mark R., 1989. "How infrastructure and financial institutions affect agricultural output and investment in India," Policy Research Working Paper Series 163, The World Bank.
- Fan, Shenggen & Zhang, Linxiu & Zhang, Xiaobo, 2002. "Growth, inequality, and poverty in rural China: the role of public investments," Research reports 125, International Food Policy Research Institute (IFPRI).
- Sachs, Jeffrey D. & Warner, Andrew M., 2001. "The curse of natural resources," European Economic Review, Elsevier, vol. 45(4-6), pages 827-838, May.
- Shenggen Fan & Peter Hazell & Sukhadeo Thorat, 2000. "Government Spending, Growth and Poverty in Rural India," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(4), pages 1038-1051.
- Gibson, John & Rozelle, Scott, 2003. "Poverty and Access to Roads in Papua New Guinea," Economic Development and Cultural Change, University of Chicago Press, vol. 52(1), pages 159-85, October.
- Mohammad R. Jahan-Parvar & Hassan Mohammadi, 2009. "Oil prices and competitiveness: time series evidence from six oil-producing countries," Journal of Economic Studies, Emerald Group Publishing, vol. 36(1), pages 98-118, January.
- Renkow, Mitch & Hallstrom, Daniel G. & Karanja, Daniel D., 2004. "Rural infrastructure, transactions costs and market participation in Kenya," Journal of Development Economics, Elsevier, vol. 73(1), pages 349-367, February.
- Paul Collier, 2006. "African Growth: Why a 'Big Push'?," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 15(2), pages 188-211, December.
- Sebastian Edwards, 1989. "Commodity Export Boom and the Real Exchange Rate: The Money-Inflation Link," NBER Working Papers 1741, National Bureau of Economic Research, Inc.
- Reinikka, Ritva & Svensson, Jakob, 2002. "Coping with poor public capital," Journal of Development Economics, Elsevier, vol. 69(1), pages 51-69, October.
- Dorosh, Paul & Thurlow, James, 2009. "Agglomeration, migration, and regional growth: A CGE analysis for Uganda," IFPRI discussion papers 848, International Food Policy Research Institute (IFPRI).
- Rutherford, Thomas & Tarr, David & Shepotylo, Oleksandr, 2005. "Poverty effects of Russia's WTO accession : modeling"real"households and endogenous productivity effects," Policy Research Working Paper Series 3473, The World Bank.
- Charles R. Hulten, 1996. "Infrastructure Capital and Economic Growth: How Well You Use It May Be More Important Than How Much You Have," NBER Working Papers 5847, National Bureau of Economic Research, Inc.
- Clausen, Volker & Schürenberg-Frosch, Hannah, 2012.
"Aid, spending strategies and productivity effects: A multi-sectoral CGE analysis for Zambia,"
Elsevier, vol. 29(6), pages 2254-2268.
- Volker Clausen & Hannah Schürenberg-Frosch, 2009. "Aid, Spending Strategies and Productivity Effects – A Multi-sectoral CGE Analysis for Zambia," Ruhr Economic Papers 0127, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dieter Stribny).
If references are entirely missing, you can add them using this form.