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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: [email protected]
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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

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