Efficiency and Equity Implications of Oil Windfalls in Brazil
Large oil reserves off the coast of Brazil may substantially increase the country s oil revenue in the future. A natural resource "curse" could be the consequence if an appropriate share of the oil revenue is not invested. This issue is a...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2013
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| Online Access: | http://documents.worldbank.org/curated/en/2013/09/18222337/efficiency-equity-implications-oil-windfalls-brazil http://hdl.handle.net/10986/15835 |
| Summary: | Large oil reserves off the coast of
Brazil may substantially increase the country s oil revenue
in the future. A natural resource "curse" could be
the consequence if an appropriate share of the oil revenue
is not invested. This issue is addressed in this paper for
Brazil both theoretically and empirically by focusing on (i)
the efficient allocation of oil revenue between investment
and consumption; and (ii) because it may be efficient to
consume a certain share of the oil revenue, the
distributional implications across generations of higher
public consumption. The main finding is that, if the
Pre-Salt oil revenue brings the aggregate oil revenue in
Brazil above 10 percent of gross domestic product, there
will be scope for consuming a certain share of it while
still maintaining efficiency. But unless oil revenue reaches
10 percent or more of gross domestic product, then all of it
should be invested in order for the economy to approach the
efficient investment level. If oil revenue as a share of
gross domestic product was 10 percent, then the achievable
growth in gross domestic product could reach 9.0 percent.
The distributional implications are positive for all
generations, but vary across generations depending on how
much of the oil revenue is invested. As a result, transfer
policies could be adjusted to ensure equality in its distribution. |
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