The Basilicata Wealth Fund: Resource Policy and Long-Run Economic Development in Southern Italy

Abstract

This paper contributes to the growing political economy literature of within-country natural resources management, by proposing a new resource policy for the oil-rich southern Italian region of Basilicata. The policy proposal is to establish a (regional) wealth fund in which all the royalty revenues from non-renewable natural resource exploitation in Basilicata would be stored and fully converted into low-risk …nancial assets. The scope is to give priority to long-run investments as to better exploit revenues from large-scale extraction of natural capital. Establishing a wealth fund at the regional sub-national level is a novel approach that can be applied to other resource-rich regions in the world. I label the fund as the Basilicata Wealth Fund (BWF). The BWF would be a regionally owned investment fund, however independently administered from national authorities (for instance, as an independent legal entity under the jurisdiction of the Bank of Italy). In addition, the paper posits a transparent and clear-cut spending …s-cal rule in order to let regional authorities use the resource revenues to …nance economic policy. The clear advantage from the BWF would be the stronger focus on long-run economic development and the higher accountability, hence avoiding misuse of resource revenues for myopic …scal spending.