Reforming wealth distribution in Kuwait: estimating costs and impacts

Like other Gulf Cooperation Council countries, Kuwait shares its wealth generously with its population. Yet the way in which it does so is inefficient, inequitable and economically distortive. This is true both for the country’s conventional social safety mechanisms and for two large-scale ‘quasi-welfare’ policies: the provision of cheap or free energy and large-scale public sector employment for citizens. Current wealth sharing policies are fiscally unsustainable given current demographic trends, disproportionately benefit richer households and deeply distort markets for energy and labour. Against this background, this paper analyses a number of alternative mechanisms of social safety and wealth sharing that could be less distortionary and more conducive to private job generation for nationals. It focuses in particular on the idea of a ‘resource dividend’: an unconditional cash grant for adult nationals that could be provided in lieu of other, more unequal, discretionary and distortive forms of subsidies and rent sharing. While the case for a resource dividend has been made in previous research, this paper goes beyond conceptual discussion and illustrates in detail how such a dividend could be financed, what its distributional consequences would be and how it should be combined with other welfare policies to minimise distortions and maximise political feasibility. The paper develops concrete scenarios illustrating how different types of households and businesses would be impacted and discusses the administrative arrangements likely to be required by resource dividend and social safety reform.