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Government Revenue Stabilization Funds: Do They Make Us Better Off?

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  • Stuart Landon
  • Constance Smith

Abstract

Alberta government resource revenues are highly volatile. Adjustment of government spending to shifts in revenues imposes social and economic costs. Using simulations, we find the establishment in the early 1970s of a rule-based Alberta government resource revenue stabilization fund could have reduced revenue volatility and increased welfare. With the best performing fund, 50 percent of natural resource revenues are deposited in the fund each year and 25 percent of the assets are withdrawn. Not all fund types increase welfare. Funds that accumulate large asset stocks yield low welfare, as do funds that base expenditure on a simple moving average of past revenues.

Suggested Citation

  • Stuart Landon & Constance Smith, 2013. "Government Revenue Stabilization Funds: Do They Make Us Better Off?," Canadian Public Policy, University of Toronto Press, vol. 39(1), pages 71-99, March.
    • Handle: RePEc:cpp:issued:v:39:y:2013:i:1:p:71-99
    DOI: 10.3138/CPP.39.1.71
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    Cited by:

    1. AlKathiri, Nader & Atalla, Tarek N. & Murphy, Frederic & Pierru, Axel, 2020. "Optimal policies for managing oil revenue stabilization funds: An illustration using Saudi Arabia," Resources Policy, Elsevier, vol. 67(C).
    2. Ouoba, Youmanli, 2020. "Natural resources fund types and capital accumulation: A comparative analysis," Resources Policy, Elsevier, vol. 66(C).
    3. Maxym Chaban & Graham M. Voss, 2016. "Is Canada an optimal currency area? An inflation targeting perspective," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 49(2), pages 738-771, May.
    4. van den Bremer, Ton S. & van der Ploeg, Frederick, 2016. "Saving Alberta's resource revenues: Role of intergenerational and liquidity funds," Energy Policy, Elsevier, vol. 99(C), pages 132-146.
    5. Ergete Ferede, 2018. "Alberta’s Fiscal Responses to Fluctuations in Non-Renewable-Resource Revenue," SPP Briefing Papers, The School of Public Policy, University of Calgary, vol. 11(23), September.
    6. Stuart Landon and Constance Smith, 2015. "Rule-Based Resource Revenue Stabilization Funds: A Welfare Comparison," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    7. Rick Van der Ploeg & Ton van den Bremer, 2016. "Saving Alberta’s Resource Revenues:," OxCarre Working Papers 179, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    8. van der Ploeg, Frederick & ,, 2016. "Saving Alberta’s Resource Revenues: Role of Intergenerational and Liquidity Funds," CEPR Discussion Papers 11522, C.E.P.R. Discussion Papers.

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