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Spending Natural Resource Revenues in an Altruistic Growth Model

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Author Info
Elisabeth Hermann Frederiksen (Department of Economics, University of Copenhagen)
Abstract

This paper examines how revenues from a natural resource interact with growth and welfare in an overlapping generations model with altruism. The revenues are allocated between public productive services and direct transfers to members of society by spending policies. We analyze how these policies influence the dynamics, and how the dynamics are influenced by the abundance of the revenue. Abundant revenues may harm growth, but growth and welfare can be oppositely affected. We also provide the socially optimal policy. Overall, the analysis suggests that variation in the strength of altruism and in spending policies may be part of the reason why natural resources seem to affect economic performance across nations differently.

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Paper provided by Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics in its series EPRU Working Paper Series with number 06-09.

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Length: 38 pages
Date of creation: Sep 2006
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Handle: RePEc:kud:epruwp:06-09

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Related research
Keywords: natural resources; economic growth; welfare; altruism;

Find related papers by JEL classification:
D64 - Microeconomics - - Welfare Economics - - - Altruism
O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)

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