Book contents
- Frontmatter
- Dedication
- Contents
- Acknowledgements
- 1 Introduction: explaining the resource curse
- 2 The Dutch disease and deindustrialization
- 3 Growth and the institutional resource curse
- 4 Empirical evidence on the resource curse
- 5 Resource rents and violent internal conflict
- 6 Managing resource rents
- 7 Concluding comments
- Appendix 1 Growth collapse with rent-seeking
- Appendix 2 A model of civil war with greed and grievances
- References
- Index
6 - Managing resource rents
Published online by Cambridge University Press: 09 August 2023
- Frontmatter
- Dedication
- Contents
- Acknowledgements
- 1 Introduction: explaining the resource curse
- 2 The Dutch disease and deindustrialization
- 3 Growth and the institutional resource curse
- 4 Empirical evidence on the resource curse
- 5 Resource rents and violent internal conflict
- 6 Managing resource rents
- 7 Concluding comments
- Appendix 1 Growth collapse with rent-seeking
- Appendix 2 A model of civil war with greed and grievances
- References
- Index
Summary
Managing resource rents efficiently and equitably is a challenging task, particularly when they are of the mineral, fuel or point-sourced variety. This is mainly because of their non-renewable characteristic, but also because once we regard natural capital as an asset its sustainable depletion involves saving, and investment in other assets – a matter that is addressed by the concept of genuine savings. Furthermore, there are inter- generational equity issues to consider. If a non-renewable asset is to be depleted, arguably some provision needs to be made so that future generations are not entirely deprived of the rents thereof. This chapter addresses some of these issues. I begin by briefly outlining matters related to assigning exploration and extraction rights for minerals and fuels; the next section outlines theoretical issues in connection with genuine saving and sustainability when natural resources are present and utilized for production; I then examine how resource rent windfalls and discoveries should be optimally utilized in the context of consumption, saving, paying off external debt and investment decisions, and whether investments should be in the domestic economy or in international markets. Optimal decision-making in this context can sometimes imply being less concerned about the welfare of future generations compared to the present generation in capital-scarce low-income countries. Finally, the last section considers management issues connected with sovereign or national wealth funds that arise out of saved resource rents. Much of the discussion in this chapter refers to optimal rules and policies in the absence of the mismanagement and policy errors that engender the resource curse.
Assigning exploration rights
On the surface, taxing oil and gas revenues seems not to alter producer behaviour, as these revenues are presumed to remain on stream irrespective of the rate at which they are taxed. But, as Boadway and Keen (2008) point out, the fear that the sovereign owner of these revenues might impose punitive taxes on these flows may actually discourage investment in the development and extraction of these resources; potential investors would therefore need to be assured that future tax burdens will not be excessive.
- Type
- Chapter
- Information
- The Resource Curse , pp. 101 - 116Publisher: Agenda PublishingPrint publication year: 2018