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ID:
176700
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| Summary/Abstract |
Exhaustible resources and the revenues they generate present a number of broad problems for macroeconomic management. For example, tax revenues can be large and highly volatile, and the stream of revenues is finite. An increasing number of countries now view resource funds and/or fiscal rules for resource revenues as the answer to these challenges. In this paper, we explore the consequences for the UK if past revenues arising from the depletion of subsoil assets had been channelled into a sovereign wealth fund. We show that had a decision been made to establish such a fund in 1975, this could have been substantial in size by 2018 (about GBP 354 billion) and, moreover, would have had a number of benefits such as a reduction in volatility of resource revenues flowing to the Treasury. Crucially, the fund's value would have substantially boosted the size of the government balance sheet, yielding corresponding fiscal benefits. We argue this missed opportunity is underlined further by considering the current debate about shale gas development in the UK. Notwithstanding considerable uncertainties, favourable and optimistic projections for key parameters are required for any shale-based fund to match what we simulate based on past experience for conventional subsoil assets.
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| 2 |
ID:
156712
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| Summary/Abstract |
The rapid growth of trust funds at multilateral development organizations has been widely neglected in the academic literature. We examine sovereign donors' choices among various trust fund options and contend that the choice among the different trust funds involves a fundamental trade-off: larger funds provide donors with “burden-sharing” benefits, but each donor can better assert its individual preferences in a fund with fewer other donors. The theoretical considerations yield testable hypotheses on a range of factors affecting this fundamental trade-off, most notably the area of the trust fund's intervention and donor countries' competing domestic interests. A large-N analysis of participation decisions of OECD/DAC donors in trust funds over the past decade mostly corroborates these hypotheses. In particular, ex ante preference alignment among donors as well as indicators for global activities and fragile states aid are robust determinants of participation in (large) multi-donor funds. In contrast, a donor tends to prefer a single-donor fund in areas where its national interests dominate.
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