Harnessing Resource Wealth for Inclusive Growth in Fragile Western African States

Corinne Deléchat, Shu-Chun Yang, Will Clark, Pranav Gupta, Malangu Kabedi-Mbuyi, Mesmin Koulet-Vickot, Carla Macario, Toomas Orav, Manuel Rosales, René Tapsoba and Dmitry Zhdankin

Journal of African Economies, 2017, vol. 26, issue 2, 256-293.e14

Abstract: Fragile countries face competing needs for allocating valuable natural resource potential, including for using the resource revenue to scale up public investment and close large infrastructure gaps. This paper uses the recently developed Debt, Investment, Growth and Natural Resources (DIGNAR) model to characterise optimal allocations of resource wealth, with a focus on the particular economic structures of fragile countries. This study adds to the existing literature by not only carefully applying the DIGNAR model to quantify key policy trade-offs facing resource-rich fragile Western African countries such as Côte d'Ivoire, Guinea, Liberia and Sierra Leone, but also by extending the model to account for the possibility of direct social transfers and of an endogeneous determination of the investment path based on fiscal rules. Key results, with far-reaching policy implications for accelerating inclusive growth stand out from the simulations. First, compared with a conservative approach based on the permanent income analysis, a sustainable non-resource deficit target is robust to the high uncertainty of resource revenues, while delivering growth benefits through higher productive public capital. Second, distributing part of resource revenues as transfers raises private consumption immediately, suggesting that a fraction of the resource revenue could be used to expand safety nets in fragile states.

Keywords: natural resources; West Africa; fragile states; social safety nets; inclusive growth (search for similar items in EconPapers)
JEL-codes: O11 O23 O41 O55 Q32 (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1093/jae/ejw026 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:jafrec:v:26:y:2017:i:2:p:256-293.e14.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

Journal of African Economies is currently edited by Francis Teal

More articles in Journal of African Economies from Centre for the Study of African Economies Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().