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Managing Resource Revenues in Developing Economies

Author

Listed:
  • Paul Collier
  • Frederick van der Ploeg
  • Michael Spence
  • Anthony J Venables

Abstract

This paper addresses the efficient management of natural resource revenues in capital-scarce developing economies. We depart from usual prescriptions based on the permanent income hypothesis, since for capital-scarce countries it is preferable to invest domestically. Since revenue streams are highly volatile, governments should protect consumption from shocks by increasing it only cautiously. Volatility in domestic investment can to an extent be moderated by a buffer of international liquidity, but it is also important to structure investment processes to be able to cope efficiently with substantial fluctuations. To date, most of the resource-rich countries of Africa have not had investment rates commensurate with their rate of resource extraction.

Suggested Citation

  • Paul Collier & Frederick van der Ploeg & Michael Spence & Anthony J Venables, 2009. "Managing Resource Revenues in Developing Economies," OxCarre Working Papers 015, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
  • Handle: RePEc:oxf:oxcrwp:015
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    File URL: http://www.oxcarre.ox.ac.uk/images/stories/papers/ResearchPapers/oxcarrerp200915.pdf
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    References listed on IDEAS

    as
    1. Xavier Sala-i-Martin & Arvind Subramanian, 2013. "Addressing the Natural Resource Curse: An Illustration from Nigeria," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 22(4), pages 570-615, August.
    2. 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.
    3. Alberto Alesina & Guido Tabellini, 1990. "A Positive Theory of Fiscal Deficits and Government Debt," Review of Economic Studies, Oxford University Press, vol. 57(3), pages 403-414.
    4. Bernardin Akitoby & Thomas Stratmann, 2008. "Fiscal Policy and Financial Markets," Economic Journal, Royal Economic Society, vol. 118(533), pages 1971-1985, November.
    5. Paul Collier & Benedikt Goderis, 2007. "Prospects for Commodity Exporters," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 8(2), pages 1-15, April.
    6. Paul Collier & Benedikt Goderis, 2007. "Commodity Prices, Growth, and the Natural Resource Curse: Reconciling a Conundrum," CSAE Working Paper Series 2007-15, Centre for the Study of African Economies, University of Oxford.
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    12. Collier, Paul & Venables, Anthony J, 2008. "Illusory Revenues: Tariffs in Resource-Rich and Aid-Rich Economies," CEPR Discussion Papers 6729, C.E.P.R. Discussion Papers.
    13. John Thornton & Fabian Bornhorst & Sanjeev Gupta, 2008. "Natural Resource Endowments, Governance, and the Domestic Revenue Effort; Evidence from a Panel of Countries," IMF Working Papers 08/170, International Monetary Fund.
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    More about this item

    Keywords

    windfall revenue; permanent income; liquidity constraints; capital scarcity; buffer stocks; volatility; commodity prices;

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • H00 - Public Economics - - General - - - General
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)

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