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Government Revenue Stabilization Funds: Do They Make Us Better Off?

Stuart Landon () and Constance Smith ()

Canadian Public Policy, 2013, vol. 39, issue 1, 71-99

Abstract: Alberta government resource revenues are highly volatile. Adjustment of government spending to shifts in revenues imposes social and economic costs. Using simulations, we find the establishment in the early 1970s of a rule-based Alberta government resource revenue stabilization fund could have reduced revenue volatility and increased welfare. With the best performing fund, 50 percent of natural resource revenues are deposited in the fund each year and 25 percent of the assets are withdrawn. Not all fund types increase welfare. Funds that accumulate large asset stocks yield low welfare, as do funds that base expenditure on a simple moving average of past revenues.

Date: 2013
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Handle: RePEc:cpp:issued:v:39:y:2013:i:1:p:71-99