How to Use Oil Revenues Efficiently
Shantayanan Devarajan ()
Additional contact information
Shantayanan Devarajan: World Bank
No 1199, Working Papers from Economic Research Forum
Oil-rich countries systematically misallocate public expenditures relative to non-oil countries–by favoring consumption over capital, and within consumption, inefficient subsidies and public-sector wages over targeted transfers. Furthermore, for given levels of expenditure, value-for-money is considerably less in oil-rich countries. This paper argues that the reason for this inefficiency is that oil revenues go directly to the government without passing through the hands of the citizens, as is the case with tax revenues. As a result, governments in oil countries are less accountable for public expenditure, which leads to inefficient spending. To improve public-spending efficiency, we propose that all oil revenues be distributed directly to citizens, and the resources that government needs be raised through taxation. We show that such a scheme improves the efficiency of public spending. We consider possible obstacles to such a reform and show that they have been overcome by technology, politics, and global events.
New Economics Papers: this item is included in nep-ene
Date: 2018-05-24, Revised 2018-05-24
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Published by The Economic Research Forum (ERF)
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:erg:wpaper:1199
Access Statistics for this paper
More papers in Working Papers from Economic Research Forum Contact information at EDIRC.
Bibliographic data for series maintained by Sherine Ghoneim ().