Article
Version 1
Preserved in Portico This version is not peer-reviewed
Containing Volatility: Windfall Revenues for Resource-Rich Low-Income Countries
Version 1
: Received: 25 July 2016 / Approved: 29 July 2016 / Online: 29 July 2016 (07:48:51 CEST)
How to cite: Keutiben, O.; Dobronogov, A. Containing Volatility: Windfall Revenues for Resource-Rich Low-Income Countries. Preprints 2016, 2016070090. https://doi.org/10.20944/preprints201607.0090.v1 Keutiben, O.; Dobronogov, A. Containing Volatility: Windfall Revenues for Resource-Rich Low-Income Countries. Preprints 2016, 2016070090. https://doi.org/10.20944/preprints201607.0090.v1
Abstract
An abundance of natural resources is both an opportunity and a challenge for developing countries. Several resource-rich, low-income countries receive amounts of foreign aid that are similar to or larger than their actual or potential revenues from natural resources. In such countries, the donors may have an opportunity to help a government to use its resource revenues productively and minimize the magnitude of risks created by resource rents. Development of aid instruments tailored for such purposes might be helped by model-based analysis of the effects of foreign aid on resource-rich, low-income economies and its interactions with the flows of natural resource revenues. This paper develops a growth model à la Barro in which the government receives windfalls (from natural resources and foreign aid) and rent-seeking agents contest for public funds. The key conclusion is that making aid countercyclical helps to achieve higher economic growth, and so does conditioning disbursements on enhancement of public capital. Introducing elements of insurance in the design of both aid products financing investments in infrastructure and social services and supporting policy and institutional reforms may help to achieve both of these objectives.
Keywords
Economic growth; Foreign aid; Natural resources; Rent-seeking; Volatility
Subject
Business, Economics and Management, Economics
Copyright: This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Comments (0)
We encourage comments and feedback from a broad range of readers. See criteria for comments and our Diversity statement.
Leave a public commentSend a private comment to the author(s)
* All users must log in before leaving a comment