The Macroeconomic Impact of Mineral Revenues on General Market Equilibrium and Poverty Alleviation in Sub-Saharan Africa
The Journal of Energy and Development, Vol. 32, No. 2, Spring 2007
29 Pages Posted: 21 Dec 2009
Date Written: May 18, 2007
Abstract
A combination of higher oil production as well as higher oil prices is creating oil revenue windfalls for some Sub-Saharan African countries. If well managed, these revenues have the potential to reduce poverty; if not they could lead to Dutch disease and an increase in income inequality. Our research examines the potential impact of government expenditure on the non-traded sector and its implications on production and wages in other sectors. It differs from previous research in several ways that more accurately reflect reality in Sub-Saharan oil exporters. We find that a tariff applied to protect a leading part of the traded sector could in the short term reduce the negative impact and help raise wages in the protected sector. However, in the medium term, once learning by doing is introduced, the potential benefit of the tariff is minimized and in the long term the tariff has a definite negative impact on the protectable sector.
Keywords: Poverty Allevaiation, General Market Equilibrium, Dutch Disease
JEL Classification: Q43, Q33, O11, Q01
Suggested Citation: Suggested Citation