Efficiency and Equity Implications of Oil Windfalls in Brazil
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World Bank, Washington, DC
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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.
Palabras clave
ACCOUNTING, AFFILIATED ORGANIZATIONS, AGGREGATE CAPITAL STOCK, AGGREGATE CONSUMPTION, AGRICULTURE, BANK POLICY, BUDGET CONSTRAINT, CAPITAL ACCUMULATION, CAPITAL INVESTMENT, CAPITAL INVESTMENTS, CAPITAL SAVING, CAPITAL SHARE, CAPITAL STOCK, CAPITAL STOCKS, CHECKS, CIVIL WAR, COMPARATIVE ECONOMICS, COMPETITIVENESS, CONSOLIDATION, CONSUMPTION INCREASES, CONSUMPTION LEVELS, CORPORATE SAVING, CURRENCY, CURRENCY OVERVALUATIONS, DEBT, DEBT MANAGEMENT, DEMOGRAPHIC, DEPENDENT VARIABLE, DEPENDENT VARIABLES, DEPRECIATION, DEVELOPMENT ECONOMICS, DEVELOPMENT PATH, DEVELOPMENT POLICY, DISCOUNT RATE, DISPOSABLE INCOME, DISTRIBUTIONAL EFFECTS, DUTCH DISEASE, ECONOMIC DEVELOPMENT, ECONOMIC GROWTH, ECONOMIC PERFORMANCE, ECONOMIC POLICY, ECONOMIC REFORM, ECONOMIC RESEARCH, ECONOMIC THEORY, EFFICIENT CAPITAL, EFFICIENT EQUILIBRIUM, EQUILIBRIUM, EXCHANGE RATE, EXOGENOUS INCOMES, EXOGENOUS SHOCKS, EXPENDITURE, EXPLANATORY VARIABLES, FACTORS OF PRODUCTION, FERTILITY RATE, FERTILITY RATES, FISCAL POLICY, FOREIGN INVESTMENTS, GDP, GDP PER CAPITA, GENERAL EQUILIBRIUM, GENERAL EQUILIBRIUM MODEL, GLOBAL INTEGRATION, GOVERNMENT ASSET, GOVERNMENT BUDGET, GOVERNMENT DEBT, GOVERNMENT INVESTMENTS, GOVERNMENT POLICIES, GOVERNMENT POLICY, GOVERNMENT REVENUE, GOVERNMENT SAVING, GOVERNMENT SPENDING, GROSS DOMESTIC PRODUCT, GROWTH POTENTIAL, GROWTH RATE, GROWTH RATES, HUMAN CAPITAL, INCOME, INCOME GROWTH, INCOME LEVEL, INCOME LEVELS, INCREASING RETURNS, INCREASING RETURNS TO SCALE, INSTRUMENT, INTEREST RATE, INTEREST RATE CHANGES, INTEREST RATES, INTERNATIONAL BANK, INTERNATIONAL TRADE, INVESTING, INVESTMENT LEVEL, INVESTMENT POLICIES, INVESTMENT POLICY, INVESTMENT PROJECTS, INVESTMENT RATE, INVESTMENT RATES, INVESTMENT RATIO, LABOR FORCE, LABOR MARKET, LIABILITY, LIABILITY MANAGEMENT, LIFE EXPECTANCY, LOSS OF COMPETITIVENESS, MACROECONOMIC EFFECTS, MACROECONOMIC MODEL, MACROECONOMIC VARIABLES, MONETARY ECONOMICS, NATIONAL INCOME, NATURAL CAPITAL, NATURAL RESOURCE, NATURAL RESOURCES, OIL BOOM, OIL RESERVES, OIL REVENUE, OIL REVENUES, OPEN ECONOMY, OPTIMAL ALLOCATION, OPTIMAL CAPITAL STOCK, OPTIMAL INVESTMENT, OPTIMIZATION, OUTPUT, OVERLAPPING GENERATIONS MODEL, PENSION, PENSION CONTRIBUTION, PENSION CONTRIBUTIONS, PENSION SYSTEM, PENSIONS, POLICY RESPONSES, POLITICAL ECONOMY, POLITICAL INSTABILITY, POPULATION GROWTH, POSITIVE EXTERNALITIES, POVERTY REDUCTION, PRIVATE CAPITAL, PRIVATE INVESTMENT, PRIVATE SAVING, PRIVATE SAVINGS, PRODUCTIVITY GROWTH, PROFITABILITY, PUBLIC DEBT, PUBLIC INVESTMENT, PUBLIC INVESTMENTS, PUBLIC POLICY, PUBLIC SAVING, RENT SEEKING, REPLACEMENT RATE, REPLACEMENT RATES, RETIREMENT AGE, RETIREMENT SAVINGS, RETURN, ROBUSTNESS CHECK, ROBUSTNESS CHECKS, SAVINGS, SAVINGS INCREASES, SHARE OF INVESTMENT, SHARES OF OIL, SLOW GROWTH, SMALL COUNTRIES, SOCIAL PROTECTION, STANDARD DEVIATION, STANDARD DEVIATIONS, STEADY STATE, STOCKS, SUSTAINABLE DEVELOPMENT, TAX, TAX INCREASE, TAXATION, TELECOMMUNICATIONS, TERMS OF CAPITAL, TRADE PATTERNS, UNCERTAINTIES, UNCERTAINTY, UTILITY FUNCTION, WAGES, WEALTH, WORKERS EXPERIENCE, ZERO INVESTMENT