Search results

The principles of how best to manage the various components of national wealth are outlined, where the permanent income hypothesis, the Hotelling rule and the Hartwick rule play a prominent role. As far as managing natural resource wealth is concerned, a case is made to use an intergenerational sovereign wealth fund to smooth consumption across generations, a liquidity fund for the precautionary buffers to deal with commodity price volatility, and an investment fund to park part of the windfall until the country is ready to absorb extra spending on domestic investment. Capital scarcity implies that a positive part of the windfall should be spent on domestic investment. The conclusions highlight the political economy problems that will have to be tackled with these normative proposals for managing wealth.

The 'resource curse' associated with natural resource abundance has long been a subject of study across multiple disciplines. Though much research has focused on possible effects of resource wealth on the formal economy, little is known about how such wealth affects the informal sector, a substantial portion of global economic activity. We posit that resource windfalls directly contribute to growth in the informal economy, as investment and spending patterns associated with such revenues limit opportunities within the formal sector and thus channel more labor and businesses into the informal sector. We test these claims across a panel of over 120 countries for the period 1985 to 2012. Across multiple model specifications, we find that resource wealth growth is associated with increased informal economic activity.

Does natural-resource wealth impede transitions to democracy? This article revisits this question with an event history design that differs from the approach used in other recent statistical tests of rentier state theory. The research confirms that autocracy is typically more durable in countries with substantial resource wealth, and the author finds this effect is robust to other measures proposed to explain the dearth of democracy in the Middle East or the Muslim world. Along the way, the author raises concerns about the use of all-countries and all-years samples to test theories of democratization, arguing that this design can obscure important differences in the forces driving stability and change among different types of political regimes.