Cover IMF Working Papers
Are Developing Countries Better Off Spending Their Oil Wealth Upfront?
Author: Mr. H. Takizawa, Mr. E. H. Gardner, and Mr. Kenichi Ueda
Series:
IMF Working Papers
Volume/Issue:
Volume 2004: Issue 141
Language:
English
Publication Date:
01 Aug 2004
DOI:
https://doi.org/10.5089/9781451856217.001
ISBN:
9781451856217
ISSN:
1018-5941
Pages:
29
Keywords:
WP; capital stock; baseline economy; oil wealth; welfare comparison; public goods; goods rise; annuity policy; Consumption; Sustainable growth; Private consumption
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund