Are Developing Countries Better off Spending their Oil Wealth Upfront?
We question the conventional view that it is optimal for government to maintain a stable level of spending out of oil wealth. We compare this conventional policy recommendation with one where government spends all of its oil revenues upfront, at the same rate as oil is extracted. Using a neoclassical growth model with positive external effects of public spending on consumption and productivity, we find that, if the economy is growing along the steady-state balanced path, the conventional view is validated. However, if the economy starts with a lower capital stock, the welfare ranking across two policies can be reversed.
|Date of creation:||01 Aug 2004|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (202) 623-7000
Fax: (202) 623-4661
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC
|Order Information:||Web: http://www.imf.org/external/pubs/pubs/ord_info.htm|
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.:
- Khan, Mohsin S & Kumar, Manmohan S, 1997. "Public and Private Investment and the Growth Process in Developing Countries," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 59(1), pages 69-88, February.
- Paul Cashin, 1995.
"Government Spending, Taxes, and Economic Growth,"
IMF Staff Papers,
Palgrave Macmillan, vol. 42(2), pages 237-269, June.
- Reinhart, Carmen & Khan, Mohsin, 1989.
"Private investment and economic growth in developing countries,"
13655, University Library of Munich, Germany.
- Khan, Mohsin S. & Reinhart, Carmen M., 1990. "Private investment and economic growth in developing countries," World Development, Elsevier, vol. 18(1), pages 19-27, January.
- Clark A. Burdick, 1997. "A transitional analysis of the welfare cost of inflation," Working Paper 97-15, Federal Reserve Bank of Atlanta.
- Aschauer, David Alan, 1989.
"Is public expenditure productive?,"
Journal of Monetary Economics,
Elsevier, vol. 23(2), pages 177-200, March.
- Kneller, Richard & Bleaney, Michael F. & Gemmell, Norman, 1999. "Fiscal policy and growth: evidence from OECD countries," Journal of Public Economics, Elsevier, vol. 74(2), pages 171-190, November.
- Nigel James Miller & Christopher Tsoukis, 2001. "On the optimality of public capital for long-run economic growth: evidence from panel data," Applied Economics, Taylor & Francis Journals, vol. 33(9), pages 1117-1129.
When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:04/141. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow)or (Hassan Zaidi)
If references are entirely missing, you can add them using this form.