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ID: 150009

Resource revenue management and wealth neutrality in Norway / Mohn, Klaus

Mohn, Klaus	Journal Article
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Summary/Abstract

An important idea behind the Norwegian oil fund mechanism and the fiscal spending rule is to protect the non-oil economy from the adverse effects of excessive spending of resource revenues over the Government budget. A critical assumption in this respect is that public sector saving is not being offset by private sector dis-saving, which is at stake with the hypothesis of Ricardian equivalence. Based on a framework of co-integrating saving rates, this model provides an empirical test of the Ricardian equivalence hypothesis on Norwegian time series data. Although the model rejects the strong-form presence of Ricardian equivalence, results indicate that the Norwegian approach does not fully succeed in separating spending of resource revenues from the accrual of the same revenues.

Key Words

Fiscal Policy ; Saving ; Oil Revenues ; Resource Wealth

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ID: 149946

Saving Alberta's resource revenues: role of intergenerational and liquidity funds / Bremer, Ton S. van den; Ploeg, Frederick van der

Bremer, Ton S. van den	Journal Article
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Summary/Abstract

We use a welfare-based intertemporal stochastic optimization model and historical data to estimate the size of the optimal intergenerational and liquidity funds and the corresponding resource dividend available to the government of the Canadian province Alberta. To first-order of approximation, this dividend should be a constant fraction of total above- and below-ground wealth, complemented by additional precautionary savings at initial times to build up a small liquidity fund to cope with oil price volatility. The ongoing dividend equals approximately 30 per cent of government revenue and requires building assets of approximately 40 per cent of GDP in 2030, 100 per cent of GDP in 2050 and 165 per cent in 2100. Finally, the effect of the recent plunge in oil prices on our estimates is examined. Our recommendations are in stark contrast with historical and current government policy.

Key Words

Fiscal Policy ; Oil Price Volatility ; Precautionary Saving ; Resource Wealth

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