Resource Rents: When to spend and how to save

May 2010 | 44

Authors: Anthony Venables

Countries with substantial revenues from renewable resources face a complex range of revenue management issues. What is the optimal time profile of consumption from the revenue, and how much should be saved? Should saving be invested in foreign funds or in the domestic economy? How does government policy influence the private sector, where sustainable growth in the domestic economy must ultimately be generated? This paper develops the issues in a simple two-period model, and argues that analysis must go well beyond the simple permanent income approach sometimes recommended.

JEL Codes: Q32, O11, E2, H0

Keywords: Natural resources, revenue management, resource curse, permanent income

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