Hostname: page-component-84b7d79bbc-l82ql Total loading time: 0 Render date: 2024-07-25T16:57:15.972Z Has data issue: false hasContentIssue false
  • English
  • Français

Spending natural resource revenues in an altruistic growth model*

Published online by Cambridge University Press:  17 October 2008

ELISABETH HERMANN FREDERIKSEN
ELISABETH HERMANN FREDERIKSEN*
Affiliation:
University of Copenhagen, EPRU, and FAME, Department of Economics, University of Copenhagen, Studiestræde 6, 1455 Copenhagen - K, Denmark. Email: ehf@econ.ku.dk
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper examines how natural resource revenues interact with growth and welfare in an overlapping generations model with altruism. The revenues are allocated between public productive services and direct transfers to members of society by spending policies. We analyze how these policies influence the dynamics, and how the dynamics are influenced by the revenue. Abundant revenues may harm growth, but growth and welfare can be oppositely affected. We also provide the social planner solution under which revenues enhance growth. Overall, the analysis suggests that variation in the strength of altruism and in spending policies may be part of the reason why natural resources seem to affect economic performance across nations differently.

Type
Research Article
Information
Environment and Development Economics , Volume 13 , Issue 6: SUSTAINABLE DEVELOPMENT , December 2008 , pp. 747 - 773
Copyright
Copyright © Cambridge University Press 2008

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Auty, R. (1993), Sustaining Development in Mineral Economies: The Resource Curse Thesis, London: Routledge.Google Scholar
Auty, R. (ed.) (2001), Resource Abundance and Economic Development, Oxford: Oxford University Press.Google Scholar
Barro, R.J. (1974), ‘Are government bonds net wealth?’, Journal of Political Economy 82: 1095–1117.CrossRefGoogle Scholar
Barro, R.J. (1990), ‘Government spending in a simple model of endogenous growth’, Journal of Political Economy 98: 103–125.CrossRefGoogle Scholar
Brunnschweiler, C.N. and Bulte, E.H. (2007), ‘The resource curse revisited and revised: a tale of paradoxes and red herrings’, Journal of Environmental Economics and Management, forthcoming.CrossRefGoogle Scholar
Caballe, J. (1998), ‘Growth effects of taxation under altruism and low elasticity of intertemporal substitution’, The Economic Journal 108: 92–104.CrossRefGoogle Scholar
Cardia, E. and Michel, Ph. (2004), ‘Altruism, intergenerational transfers of time and bequests’, Journal of Economic Dynamics and Control 28: 1681–1701.CrossRefGoogle Scholar
Chatterjee, S., Sakoulis, G., and Turnovsky, S.J. (2003), ‘Unilateral capital transfers, public investment, and economic growth’, European Economic Review 47: 1077–1103.CrossRefGoogle Scholar
Corden, W.M. and Neary, J.P. (1982), ‘Booming sector and de-industrialisation in small open economy’, The Economic Journal 92: 359–380.CrossRefGoogle Scholar
Cox, D., Galasso, E., and Jimenez, E. (2006), ‘Private transfers in a cross section of developing countries’, CRR Working Paper 2006-2, Center for Retirement Research, Boston College.Google Scholar
Croix, D. and Michel, Ph. (2002), A Theory of Economic Growth: Dynamics and Policy in Overlapping Generations, Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Dasgupta, P.S. and Heal, G.M. (1979), Economic Theory and Exhaustible Resources, Cambridge: Cambridge University Press.Google Scholar
Frederiksen, E.H. (2007), ‘Empirics of economic growth and natural resources’, Department of Economics, University of Copenhagen, Copenhagen.Google Scholar
Hannesson, R. (2001), Investing for Sustainability: The Management of Mineral Wealth, Norwell, MA: Kluwer Academic Publishers.CrossRefGoogle Scholar
Hartwick, J. (1977), ‘Intergenerational equity and the investing of revenues from exhaustible resources’, American Economic Review 67: 972–991.Google Scholar
Hotelling, H. (1931), ‘The economics of exhaustible resources’, Journal of Political Economy 39: 137–175.CrossRefGoogle Scholar
King, I. and Ferguson, D. (1993), ‘Dynamic inefficiency, endogenous growth and Ponzi games’, Journal of Monetary Economics 31: 79–104.CrossRefGoogle Scholar
Kotlikoff, L.J. and Summers, L.H. (1981), ‘The contribution of intergenerational transfers in aggregate capital accumulation’, Journal of Political Economy 89: 706–732.CrossRefGoogle Scholar
Kotlikoff, L.J. and Summers, L.H. (1986), ‘The contribution of intergenerational transfers to total wealth: a reply’, Working Paper 1827, NBER working paper series, National Bureau of Economics Research, Massachusetts.CrossRefGoogle Scholar
Larsen, E.R. (2005), ‘Are rich countries immune to the resource curse? Evidence from Norway's management of its oil riches’, Resources Policy 30: 75–86.CrossRefGoogle Scholar
Lesink, R. and White, H. (2001), ‘Are there negative returns to aid?’, Journal of Development Studies 37: 42–65.CrossRefGoogle Scholar
Matsen, E. and Torvik, R. (2005), ‘Optimal Dutch disease’, Journal of Development Economics 78: 494–515.CrossRefGoogle Scholar
Mehlum, H., Moene, K., and Torvik, R. (2006), ‘Institutions and the resource curse’, Economic Journal 116: 1–20.CrossRefGoogle Scholar
Modigliani, F. (1988), ‘The role of intergenerational transfers and life cycle saving in the accumulation of wealth’, Journal of Economic Perspectives 2: 15–40.CrossRefGoogle Scholar
Ng, E. (2006), ‘Is natural resource abundance beneficial or detrimental to output level and growth?’, Department of Economics, University of Western Ontario, Canada.Google Scholar
Papyrakis, E. and Gerlagh, R. (2006), ‘Resource windfalls, investment, and long-term income’, Resources Policy 31: 117–128.CrossRefGoogle Scholar
Robinson, J.A. and Torvik, R. (2005), ‘White elephants’, Journal of Public Economics 89: 197–210.CrossRefGoogle Scholar
Rodriguez, F. and Sachs, J. D. (1999), ‘Why do resource abundant economies grow more slowly? A new explanation and application to Venezuela’, Journal of Economic Growth 4: 277–303.CrossRefGoogle Scholar
Ross, M. (2004), ‘What do we know about natural resources and civil war?’, Journal of Peace Research 41: 337–356.CrossRefGoogle Scholar
Ross, M. (2006), ‘A closer look at oil, diamonds, and civil war’, Annual Review of Political Science 9: 265–300.CrossRefGoogle Scholar
Sachs, J.D. and Warner, A.M. (1995), ‘Natural resource abundance and economic growth’, Working Paper 5398, NBER working paper series, National Bureau of Economics Research, Massachusetts.CrossRefGoogle Scholar
Sachs, J.D. and Warner, A.M. (1999), ‘The big push, natural resource booms and growth’, Journal of Development Economics 59: 43–76.CrossRefGoogle Scholar
Sachs, J.D. and Warner, A.M. (2001), ‘Natural resources and economic development: the curse of natural resources’, European Economic Review 45: 827–838.CrossRefGoogle Scholar
Sala-i-Martin, X., Doppelhofer, G., and Miller, R.I. (2004), ‘Determinants of long-term growth: a Bayesian averaging of classical estimates (BACE) approach’, American Economic Review 94: 813–835.CrossRefGoogle Scholar
Sala-i-Martin, X. and Subramanian, A. (2003), ‘Addressing the natural resource curse: an illustration from Nigeria’, Working Paper 9804, NBER working paper series, National Bureau of Economic Research, Massachusetts.CrossRefGoogle Scholar
Solow, R. (1974), ‘Intergenerational equity and exhaustible resources’, Review of Economic Studies 41: 29–45.CrossRefGoogle Scholar
Solow, R. (1986), ‘On the intergenerational allocation of natural resources’, Scandinavian Journal of Economics 88: 143–154.CrossRefGoogle Scholar
Stevens, P. (2003), ‘Resource impact: curse or blessing? A literature survey’, Journal of Energy Literature 9: 3–42.Google Scholar
Stijns, J.-Ph. (2005), ‘Natural resource abundance and economic growth revisited’, Resources Policy 30: 107–130.CrossRefGoogle Scholar
Tornell, A. and Lane, P.R. (1999), ‘The voracity effect’, American Economic Review 89: 22–46.CrossRefGoogle Scholar
Torvik, R. (2001), ‘Learning by doing and the Dutch disease effect’, European Economic Review 45: 285–306.CrossRefGoogle Scholar
Torvik, R. (2002), ‘Natural resources, revenue seeking and welfare’, Journal of Development Economics 67: 455–470.CrossRefGoogle Scholar
van Wijnbergen, S. (1984), ‘The “Dutch disease”: a disease after all?’, Economic Journal 94: 41–55.CrossRefGoogle Scholar
Weil, Ph. (1987), ‘Love thy children: reflections on the Barro debt neutrality theorem’, Journal of Monetary Economics 19: 377–391.CrossRefGoogle Scholar
World Bank (1999), ‘Chad, Cameroon – petroleum development and pipeline project: environmental assessment’, Environmental management plan – Chad portion, vol. 19, World Development Sources.Google Scholar
World Bank (2005), World Development Indicators 2005, CD-ROM.Google Scholar