Nonrenewable Resources: A Case for Persistent Fiscal Surpluses

29 Pages Posted: 12 Feb 2006

See all articles by Max Alier

Max Alier

World Bank

Martin Kaufman

International Monetary Fund (IMF) - Western Hemisphere Department

Date Written: April 1999

Abstract

This paper examines whether there is a case for temporary but persistent fiscal surpluses in economies heavily endowed with nonrenewable resources. It finds that there generally is a case. Fiscal surpluses permit replacing nonfinancial wealth with financial assets, the return on which increases public consumption possibilities of future generations for a constant across-generation tax burden. The more biased are a government`s preferences toward present generations, the lower will be the initial surpluses; the larger the finite endowment, the larger the initial surpluses. In a more general framework, including public investment, the proposition could be rephrased by replacing surpluses with stronger initial fiscal positions.

Keywords: Fiscal policy, nonrenewable resources, intergenerational transfer, overlapping generation model, Chile

JEL Classification: E62, Q38

Suggested Citation

Alier, Max and Kaufman, Martin, Nonrenewable Resources: A Case for Persistent Fiscal Surpluses (April 1999). IMF Working Paper No. 99/44, Available at SSRN: https://ssrn.com/abstract=880571

Max Alier (Contact Author)

World Bank

1818 H Street, N.W.
Washington, DC 20433
United States

Martin Kaufman

International Monetary Fund (IMF) - Western Hemisphere Department ( email )

700 19th Street NW
Washington, DC 20431
United States

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