Minerals are a shared inheritance: Accounting for the resource curse

Rahul Basu and Scott Pegg

MPRA Paper from University Library of Munich, Germany

Abstract: Many countries badly mismanage their natural resource endowments. We argue that a fundamental change in paradigm is needed. Specifically, we advocate treating non-renewable natural resources as a finite shared inheritance asset, and extraction as the sale of the inherited wealth. We identify several proposals that logically derive from treating natural resource proceeds as sales of a finite intergenerational inheritance rather than as revenues that can be spent. Such proposals suggest that mineral owners must strive for zero-loss when selling minerals, establish a passively invested future generations fund from the proceeds and distribute dividends from that fund to citizens as the rightful owners of the shared inheritance. The current dominant metaphor of proceeds from the exploitation of non-renewable mineral resources as being “windfall revenues” is underpinned by government accounting standards. The “windfall revenue” metaphor is not only inaccurate but also produces several pernicious effects that help explain the poor management of natural resource endowments in so many countries. We do not anticipate that our ideas will quickly overturn decades of established practice. We do, however, believe that the case needs to be made.

Keywords: resource curse; government accounting standards; inter-generational equity; public sector net worth; shared inheritance (search for similar items in EconPapers)
JEL-codes: B52 E2 E62 G02 G1 H2 H3 H4 H54 H6 H82 K0 Q3 Z1 (search for similar items in EconPapers)
Date: 2020-06-08
New Economics Papers: this item is included in nep-ene, nep-env, nep-hme and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:102270

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