La manne des ressources naturelles, l’investissement public optimal et la redistribution: le rôle de la productivité totale des facteurs et de la capacité de l’État

Rabah Arezki, Arnaud Dupuy () and Alan Gelb

Revue d’économie du développement, 2020, vol. 28, issue 1, 5-41

Abstract: This paper studies optimal public investment decisions in countries experiencing a resource windfall. To do so, we use an augmented version of the permanent income framework, as public investment is faced with adjustment costs capturing the associated state capacity as well as direct government transfers. A key assumption is that those adjustment costs will rise in proportion to the size of the resource windfall. The main results from the analytical model are threefold. First, a larger resource windfall commands a lower level of public capital but a higher level of redistribution through transfers. Second, weaker state capacity lowers the increase in optimal public capital following a resource windfall. Third, higher total factor productivity in the non-resource sector reduces the degree of disinvestment in public capital commanded by weaker state capacity. We further extend our basic model to allow for ?investing in investing??that is, public investment in state capacity?by endogenizing the adjustment cost of public investment. Results from the numerical simulations suggest, among other things, that a higher initial stock of public ?know-how? leads to a higher level of optimal public investment following a resource windfall. Implications for policy are discussed.

Keywords: state capacity; resource windfall; public investment; total factor productivity (search for similar items in EconPapers)
Date: 2020
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