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Natural resource revenue, spending strategies and economic growth in Niger


  • Go, Delfin S.
  • Robinson, Sherman
  • Thierfelder, Karen


In this paper, we use a recursive dynamic computable general equilibrium (CGE) model to examine spending strategies in Niger, a resource-rich, low-income country that has a windfall gain from mineral export revenue. The recent literature on Dutch disease describes alternative policy rules to manage the income flow from the expected natural resource revenue, which can either be spent to raise immediate consumption or on public infrastructure to increase future productivity. We simulate four strategies. As a conservative strategy, Niger can spend only the interest earned on revenue in a sovereign wealth fund (bird-in-hand strategy); alternatively, it can borrow to spend now and repay with expected natural resource revenue. The key to the benefits of significant mineral revenue lies with the productivity and supply responses of spending. If significant output gain is assured, the different spending strategies have very similar effects on real consumption. Dutch disease, the overshooting of relative prices of non-tradable sector or the shrinking share of traded sectors in the economy, is also ameliorated with greater supply flexibility. Growth paths of alternative spending strategies differ markedly in timing and pattern, however, when spending does not raise productivity. The more aggressive spending plan may result in a boom–bust cycle if fiscal adjustments and debt repayments are necessary for any significant borrowing against future revenue and productivity gains are not realized.

Suggested Citation

  • Go, Delfin S. & Robinson, Sherman & Thierfelder, Karen, 2016. "Natural resource revenue, spending strategies and economic growth in Niger," Economic Modelling, Elsevier, vol. 52(PB), pages 564-573.
  • Handle: RePEc:eee:ecmode:v:52:y:2016:i:pb:p:564-573 DOI: 10.1016/j.econmod.2015.10.001

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    References listed on IDEAS

    1. Frederick van der Ploeg & Anthony J. Venables, 2011. "Harnessing Windfall Revenues: Optimal Policies for Resource‐Rich Developing Economies," Economic Journal, Royal Economic Society, vol. 121(551), pages 1-30, March.
    2. Halvor Mehlum & Karl Moene & Ragnar Torvik, 2006. "Institutions and the Resource Curse," Economic Journal, Royal Economic Society, vol. 116(508), pages 1-20, January.
    3. van der Ploeg, Frederick, 2010. "Aggressive oil extraction and precautionary saving: Coping with volatility," Journal of Public Economics, Elsevier, vol. 94(5-6), pages 421-433, June.
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    5. Paul Collier & Rick Van Der Ploeg & Michael Spence & Anthony J Venables, 2010. "Managing Resource Revenues in Developing Economies," IMF Staff Papers, Palgrave Macmillan, vol. 57(1), pages 84-118, April.
    6. Frankel, Jeffrey A., 2012. "The Natural Resource Curse: A Survey of Diagnoses and Some Prescriptions," Scholarly Articles 8694932, Harvard Kennedy School of Government.
    7. Frederick van der Ploeg, 2011. "Natural Resources: Curse or Blessing?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 366-420, June.
    8. Delfin Go & Marna Kearney & Vijdan Korman & Sherman Robinson & Karen Thierfelder, 2010. "Wage Subsidy and Labour Market Flexibility in South Africa," Journal of Development Studies, Taylor & Francis Journals, vol. 46(9), pages 1481-1502.
    9. Sherman Robinson & Andrea Cattaneo & Moataz El-Said, 2001. "Updating and Estimating a Social Accounting Matrix Using Cross Entropy Methods," Economic Systems Research, Taylor & Francis Journals, vol. 13(1), pages 47-64.
    10. Corden, W Max & Neary, J Peter, 1982. "Booming Sector and De-Industrialisation in a Small Open Economy," Economic Journal, Royal Economic Society, vol. 92(368), pages 825-848, December.
    11. Go, Delfin S. & Robinson, Sherman & Thierfelder, Karen & Utz, Robert, 2013. "Dutch disease and spending strategies in a resource-rich low-income country -- the case of Niger," Policy Research Working Paper Series 6691, The World Bank.
    12. Lofgren, Hans & Cicowiez, Martin & Diaz-Bonilla, Carolina, 2013. "MAMS – A Computable General Equilibrium Model for Developing Country Strategy Analysis," Handbook of Computable General Equilibrium Modeling, Elsevier.
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    14. Marcos Poplawski-Ribeiro & Mauricio Villafuerte & Thomas Baunsgaard & Christine J. Richmond, 2012. "Fiscal Frameworks for Resource Rich Developing Countries," IMF Staff Discussion Notes 12/04, International Monetary Fund.
    15. Devarajan, Shantayanan & Go, Delfin S., 1998. "The Simplest Dynamic General-Equilibrium Model of an Open Economy," Journal of Policy Modeling, Elsevier, vol. 20(6), pages 677-714, December.
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    Cited by:

    1. Arthelo P. PALMA, 2016. "Truth Behind Economic Performance, Natural Resources and Attracting Foreign Direct Investment," Expert Journal of Economics, Sprint Investify, vol. 4(2), pages 68-77.


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