The Political Economy of Direct Dividend Transfers in Resource-Rich Countries : A Theoretical Consideration
The acceleration of natural resource discoveries across many parts of the developing world has highlighted the urgent need for solutions to the mismanagement of windfalls that has blighted many countries over the past half-century. One proposal inv...
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| Format: | Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2016
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| Online Access: | http://documents.worldbank.org/curated/en/2016/02/25963840/ http://hdl.handle.net/10986/23894 |
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okr-10986-238942021-04-23T14:04:18Z The Political Economy of Direct Dividend Transfers in Resource-Rich Countries : A Theoretical Consideration McGuirk, Eoin Rajaram, Anand Giugale, Marcelo RENT SEEKING PLEDGES CURRENCY APPRECIATION CHECKS DEPOSITS UTILITY FUNCTIONS STOCK STRUCTURAL CHANGE INCOME INTEREST PUBLIC INVESTMENTS EXPECTATIONS GOVERNMENT SPENDING EXCHANGE OPTION EXPORTS DEVELOPING COUNTRIES POLITICAL ECONOMY REVENUES PORTFOLIO WELFARE DIMINISHING RETURNS INCENTIVES EQUILIBRIUM DISCOUNT CAPITAL STOCK PUBLIC ASSETS TAX PARTICIPATION ∗ CONSTRAINT CASH TRANSFER REFERENDUM PAYMENTS WEALTH PLEDGE BENEFICIARIES INTERNATIONAL BANK PENSION DEVELOPING COUNTRY CREDIBILITY DEVELOPMENT INFLUENCE BENEFICIARY ALLOCATION OF CAPITAL COSTS PARTICIPATION CONSTRAINT VOTERS CURRENCY DEVELOPMENT ECONOMICS IMMUNIZATION INCOME GROWTH RENT ECONOMETRICS OPTIONS GLOBALIZATION CRITERIA DEBT RETURN LENDERS OPEN ECONOMY DIVIDENDS RESERVES UTILITY NATURAL RESOURCES NEGATIVE SHOCKS CASH TRANSFERS COMMODITY PRICE FINANCE BANK POLICY PUBLIC INVESTMENT TAXES EXPENDITURE CONSUMPTION CREDIT CONSTRAINTS GOOD TAX RATE FRAUD ECONOMIC PERFORMANCE TRANSPARENCY COUPONS FUTURE VALUE COMPETITIVENESS RETURNS CREDIT PERMANENT INCOME GOVERNMENT EXPENDITURE UTILITY FUNCTION INVESTMENT PROJECTS EXPECTED VALUE CONTRACT PRODUCTIVE ASSETS EXPENDITURES PROPERTIES INSTITUTIONAL CAPACITY SHARES OPPORTUNITY COSTS ASSETS MARKET ECONOMICS PUBLIC DEBT TAXATION PERMANENT INCOME HYPOTHESIS TRADE INTERESTS GOODS SECURITY FINANCIAL MARKET INVESTMENT EXPECTED UTILITY SHARE POVERTY FISCAL BURDENS FINANCIAL ASSETS ADVERSE EFFECT REVENUE INVESTMENTS LENDING GOVERNMENT LENDING RISK AVERSION PIH PUBLIC SPENDING DIRECT INVESTMENTS COMMODITY PRICES OUTCOMES MARGINAL UTILITY LESS DEVELOPED COUNTRIES MARGINAL UTILITY OF CONSUMPTION DEVELOPMENT POLICY HUMAN DEVELOPMENT INCOME VOLATILITY The acceleration of natural resource discoveries across many parts of the developing world has highlighted the urgent need for solutions to the mismanagement of windfalls that has blighted many countries over the past half-century. One proposal involves distributing annually a share of resource rents to citizens in the form of direct dividend transfers. Although many scholars and policy makers have discussed the potential economic and political ramifications of the proposal from a normative perspective, few have analyzed positively the conditions under which such a policy may emerge as a politically rational choice. This policy research paper fills that gap by modeling the decision of political leaders to allocate resource revenues between cash transfers, public goods, power-preserving activities, and personal consumption. The analysis finds first that propitious political conditions, including competitive elections, undeveloped patronage networks, and a high degree of budgetary accountability, increase the share of resource revenues to be spent on citizens' welfare. The paper then shows that a high poverty headcount and inefficient public institutions will each strengthen the political incentive to provide direct dividend transfers relative to public goods. This combination of conditions is rare, which may explain why relatively few countries have implemented or plan to implement direct dividend transfers. 2016-03-09T17:14:42Z 2016-03-09T17:14:42Z 2016-02 Working Paper http://documents.worldbank.org/curated/en/2016/02/25963840/ http://hdl.handle.net/10986/23894 English en_US Policy Research Working Paper;No. 7575 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
RENT SEEKING PLEDGES CURRENCY APPRECIATION CHECKS DEPOSITS UTILITY FUNCTIONS STOCK STRUCTURAL CHANGE INCOME INTEREST PUBLIC INVESTMENTS EXPECTATIONS GOVERNMENT SPENDING EXCHANGE OPTION EXPORTS DEVELOPING COUNTRIES POLITICAL ECONOMY REVENUES PORTFOLIO WELFARE DIMINISHING RETURNS INCENTIVES EQUILIBRIUM DISCOUNT CAPITAL STOCK PUBLIC ASSETS TAX PARTICIPATION ∗ CONSTRAINT CASH TRANSFER REFERENDUM PAYMENTS WEALTH PLEDGE BENEFICIARIES INTERNATIONAL BANK PENSION DEVELOPING COUNTRY CREDIBILITY DEVELOPMENT INFLUENCE BENEFICIARY ALLOCATION OF CAPITAL COSTS PARTICIPATION CONSTRAINT VOTERS CURRENCY DEVELOPMENT ECONOMICS IMMUNIZATION INCOME GROWTH RENT ECONOMETRICS OPTIONS GLOBALIZATION CRITERIA DEBT RETURN LENDERS OPEN ECONOMY DIVIDENDS RESERVES UTILITY NATURAL RESOURCES NEGATIVE SHOCKS CASH TRANSFERS COMMODITY PRICE FINANCE BANK POLICY PUBLIC INVESTMENT TAXES EXPENDITURE CONSUMPTION CREDIT CONSTRAINTS GOOD TAX RATE FRAUD ECONOMIC PERFORMANCE TRANSPARENCY COUPONS FUTURE VALUE COMPETITIVENESS RETURNS CREDIT PERMANENT INCOME GOVERNMENT EXPENDITURE UTILITY FUNCTION INVESTMENT PROJECTS EXPECTED VALUE CONTRACT PRODUCTIVE ASSETS EXPENDITURES PROPERTIES INSTITUTIONAL CAPACITY SHARES OPPORTUNITY COSTS ASSETS MARKET ECONOMICS PUBLIC DEBT TAXATION PERMANENT INCOME HYPOTHESIS TRADE INTERESTS GOODS SECURITY FINANCIAL MARKET INVESTMENT EXPECTED UTILITY SHARE POVERTY FISCAL BURDENS FINANCIAL ASSETS ADVERSE EFFECT REVENUE INVESTMENTS LENDING GOVERNMENT LENDING RISK AVERSION PIH PUBLIC SPENDING DIRECT INVESTMENTS COMMODITY PRICES OUTCOMES MARGINAL UTILITY LESS DEVELOPED COUNTRIES MARGINAL UTILITY OF CONSUMPTION DEVELOPMENT POLICY HUMAN DEVELOPMENT INCOME VOLATILITY |
| spellingShingle |
RENT SEEKING PLEDGES CURRENCY APPRECIATION CHECKS DEPOSITS UTILITY FUNCTIONS STOCK STRUCTURAL CHANGE INCOME INTEREST PUBLIC INVESTMENTS EXPECTATIONS GOVERNMENT SPENDING EXCHANGE OPTION EXPORTS DEVELOPING COUNTRIES POLITICAL ECONOMY REVENUES PORTFOLIO WELFARE DIMINISHING RETURNS INCENTIVES EQUILIBRIUM DISCOUNT CAPITAL STOCK PUBLIC ASSETS TAX PARTICIPATION ∗ CONSTRAINT CASH TRANSFER REFERENDUM PAYMENTS WEALTH PLEDGE BENEFICIARIES INTERNATIONAL BANK PENSION DEVELOPING COUNTRY CREDIBILITY DEVELOPMENT INFLUENCE BENEFICIARY ALLOCATION OF CAPITAL COSTS PARTICIPATION CONSTRAINT VOTERS CURRENCY DEVELOPMENT ECONOMICS IMMUNIZATION INCOME GROWTH RENT ECONOMETRICS OPTIONS GLOBALIZATION CRITERIA DEBT RETURN LENDERS OPEN ECONOMY DIVIDENDS RESERVES UTILITY NATURAL RESOURCES NEGATIVE SHOCKS CASH TRANSFERS COMMODITY PRICE FINANCE BANK POLICY PUBLIC INVESTMENT TAXES EXPENDITURE CONSUMPTION CREDIT CONSTRAINTS GOOD TAX RATE FRAUD ECONOMIC PERFORMANCE TRANSPARENCY COUPONS FUTURE VALUE COMPETITIVENESS RETURNS CREDIT PERMANENT INCOME GOVERNMENT EXPENDITURE UTILITY FUNCTION INVESTMENT PROJECTS EXPECTED VALUE CONTRACT PRODUCTIVE ASSETS EXPENDITURES PROPERTIES INSTITUTIONAL CAPACITY SHARES OPPORTUNITY COSTS ASSETS MARKET ECONOMICS PUBLIC DEBT TAXATION PERMANENT INCOME HYPOTHESIS TRADE INTERESTS GOODS SECURITY FINANCIAL MARKET INVESTMENT EXPECTED UTILITY SHARE POVERTY FISCAL BURDENS FINANCIAL ASSETS ADVERSE EFFECT REVENUE INVESTMENTS LENDING GOVERNMENT LENDING RISK AVERSION PIH PUBLIC SPENDING DIRECT INVESTMENTS COMMODITY PRICES OUTCOMES MARGINAL UTILITY LESS DEVELOPED COUNTRIES MARGINAL UTILITY OF CONSUMPTION DEVELOPMENT POLICY HUMAN DEVELOPMENT INCOME VOLATILITY McGuirk, Eoin Rajaram, Anand Giugale, Marcelo The Political Economy of Direct Dividend Transfers in Resource-Rich Countries : A Theoretical Consideration |
| relation |
Policy Research Working Paper;No. 7575 |
| description |
The acceleration of natural resource
discoveries across many parts of the developing world has
highlighted the urgent need for solutions to the
mismanagement of windfalls that has blighted many countries
over the past half-century. One proposal involves
distributing annually a share of resource rents to citizens
in the form of direct dividend transfers. Although many
scholars and policy makers have discussed the potential
economic and political ramifications of the proposal from a
normative perspective, few have analyzed positively the
conditions under which such a policy may emerge as a
politically rational choice. This policy research paper
fills that gap by modeling the decision of political leaders
to allocate resource revenues between cash transfers, public
goods, power-preserving activities, and personal
consumption. The analysis finds first that propitious
political conditions, including competitive elections,
undeveloped patronage networks, and a high degree of
budgetary accountability, increase the share of resource
revenues to be spent on citizens' welfare. The paper
then shows that a high poverty headcount and inefficient
public institutions will each strengthen the political
incentive to provide direct dividend transfers relative to
public goods. This combination of conditions is rare, which
may explain why relatively few countries have implemented or
plan to implement direct dividend transfers. |
| format |
Working Paper |
| author |
McGuirk, Eoin Rajaram, Anand Giugale, Marcelo |
| author_facet |
McGuirk, Eoin Rajaram, Anand Giugale, Marcelo |
| author_sort |
McGuirk, Eoin |
| title |
The Political Economy of Direct Dividend Transfers in Resource-Rich Countries : A Theoretical Consideration |
| title_short |
The Political Economy of Direct Dividend Transfers in Resource-Rich Countries : A Theoretical Consideration |
| title_full |
The Political Economy of Direct Dividend Transfers in Resource-Rich Countries : A Theoretical Consideration |
| title_fullStr |
The Political Economy of Direct Dividend Transfers in Resource-Rich Countries : A Theoretical Consideration |
| title_full_unstemmed |
The Political Economy of Direct Dividend Transfers in Resource-Rich Countries : A Theoretical Consideration |
| title_sort |
political economy of direct dividend transfers in resource-rich countries : a theoretical consideration |
| publisher |
World Bank, Washington, DC |
| publishDate |
2016 |
| url |
http://documents.worldbank.org/curated/en/2016/02/25963840/ http://hdl.handle.net/10986/23894 |
| _version_ |
1764455085977370624 |