Resource Rents, Redistribution, and Halving Global Poverty: The Resource Dividend

Abstract

This paper considers the proposal that each country distribute its resource rents directly to citizens as a universal and unconditional cash transfer, or Resource Dividend, and estimates its potential impact on global poverty. Using a global dataset on resource rents and the distribution of income, I find that if every developing country implemented the policy then the number of people living below the World Bank's $1 a day global poverty line would be halved. A range of further practical benefits are discussed, including the amelioration of the resource curse in resource-rich countries, and the incentive that the policy provides to informal workers to register with the fiscal system. Administrative and political challenges that the policy would face are discussed, and it is argued that in most cases they would not be insuperable.

Could Resource Rents Finance Universal Access to Infrastructure? A First Exploration of Needs and Rents

“…A seminal contribution combining resource rent taxation and alleviation of income poverty is by Segal (2010), who highlights that full redistribution of resource rents could reduce the global number of people living on less than US$1 a day by up to two-thirds. 3 An additional contribution is that we provide a newly compiled data set, based on different sources and our own assumptions and calculations, for the comparison of infrastructure gaps and the cost of closing them, which we additionally merge with an extrapolation of resource rents from the World Development Indicators (WDI) (World Bank, 2014).…”

Fiscal Policy and Natural Resource Entitlements

“…Scott (2010) argues for a greatly expanded system of social spending, including a universal social security system, improved targeting of povertyreduction schemes, and improved health and education spending, funded by a rise in general taxation. A second distributive policy, and in conceptual terms the simplest, is direct distribution, or a resource dividend, under which each citizen receives his or her share of oil revenues as a cash payment (Palley, 2003;Sala-i-Martín and Subramanian, 2003;Birdsall and Subramanian, 2004;Sandbu, 2006;Segal, 2011a). Fiscal policy can then be considered to be additional to this lump-sum endowment, taxing citizens on the basis of their total income net of the cash payment, and providing benefits.…”

“…Nonetheless, Pemex contracts private oil service companies to perform specific tasks. 3 See Segal (2011a;2011b) for further discussion of resource rents. In practice, determining what counts as rents is complicated by the fact that the resource sector is subject to high levels of unavoidable uncertainty, and that ex ante risks can translate into high ex post profits in some cases.…”

“…The second major risk is price volatility, which can imply high volatility of profits. 4 The idea of resource entitlements also underlies a growing literature on the direct distribution of resource revenues (Palley, 2003;Sala-i-Martín and Subramanian, 2003;Birdsall and Subramanian, 2004;Sandbu, 2006;Segal, 2011a). 5 To the extent that these revenues are saved, which in some cases will be optimal, they are intended to finance future government expenditure.…”

“…Since rents do not start off as the property of any individual, expenditure of resource rents implies distribution, but not redistribution (Segal 2011a). …”