Increasing Public Expenditure Efficiency in Oil-rich Economies : A Proposal

This paper proposes that, to increase the efficiency of public spending in oil-rich economies, some or all of the oil revenues be transferred to citizens, and fiscal instruments such as taxation be used to finance public expenditures. The authors d...

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Bibliographic Details
Main Authors:	Devarajan, Shantayanan, Le, Tuan Minh, Raballand, Gaël
Format:	Policy Research Working Paper
Language:	English
Published:	2012
Subjects:	ACCOUNTABILITY ACCOUNTABILITY OF PUBLIC SPENDING ACCOUNTING ANNUAL BUDGETS BANK POLICY BUDGET BUDGETARY OPERATIONS BUREAUCRACY CENTRAL GOVERNMENT CHECKS CITIZENS CIVIL SERVICE CONSENSUS CONSTITUENCIES CONSUMPTION EXPENDITURE CONTRACT CORRUPTION CREDIBILITY DEFICIT DEMOCRACY DEMOCRATIC PROCESS DEVELOPING COUNTRIES DISCLOSURE DISTRICTS DOMESTIC REVENUE DOMESTIC TAXATION ECONOMIC ANALYSIS ECONOMIC DEVELOPMENT ECONOMIC GROWTH EDUCATION SPENDING EFFICIENCY IN PUBLIC SPENDING EFFICIENCY OF PUBLIC SPENDING EXCHANGE EXPENDITURE CONTROL EXPENDITURE CONTROL SYSTEMS EXPENDITURE CONTROLS EXPENDITURE EFFICIENCY EXPENDITURE PER CAPITA EXTERNAL FUNDING FEES FINANCE FISCAL FISCAL DECENTRALIZATION FISCAL FEDERALISM FISCAL PERFORMANCE FISCAL STABILIZATION FORECASTING FUTURE GLOBALIZATION GOOD GOOD GOVERNANCE GOVERNANCE GOVERNANCE INDICATORS GOVERNMENT ACCOUNTABILITY GOVERNMENT INVESTMENT GOVERNMENT SPENDING GOVERNMENTS GROSS DOMESTIC PRODUCT HOLDING HUMAN CAPITAL INCENTIVES INCOME TAXES INDEPENDENCE INFRASTRUCTURE INSTITUTIONAL ARRANGEMENTS INSTITUTIONAL CONSTRAINTS INSTRUMENTS INTEREST INTERESTS INTERNATIONAL BANK INTERNATIONAL STANDARD INVESTMENT LACK OF ACCOUNTABILITY LEVEL OF TAXATION LIEN LOCAL TAX MACROECONOMIC STABILITY MEDIUM-TERM EXPENDITURE MEDIUM-TERM EXPENDITURE FRAMEWORKS NATIONS NATURAL RESOURCES OIL BOOM OIL BOOMS OIL PRICES OIL PRODUCTS OIL RESERVES OIL RESOURCES OPTION OUTCOMES PER PERMANENT INCOME HYPOTHESIS PERSONAL INCOME PERSONAL INCOME TAX POLICY FORMULATION POLICY FRAMEWORK POLICY MAKERS POLICY RECOMMENDATIONS POLICY VARIABLES POLITICAL ECONOMY POLITICAL FEASIBILITY POLITICIANS POVERTY PROPERTY PROPERTY TAXES PUBLIC PUBLIC BUDGETING PUBLIC BUDGETS PUBLIC EDUCATION PUBLIC EDUCATION EXPENDITURE PUBLIC EXPENDITURE PUBLIC EXPENDITURE EFFICIENCY PUBLIC EXPENDITURE REVIEWS PUBLIC EXPENDITURES PUBLIC FUNDS PUBLIC GOODS PUBLIC OVERSIGHT PUBLIC POWER PUBLIC RESOURCES PUBLIC SERVICES PUBLIC SPENDING PUBLIC SPENDING LEVELS PURCHASING POWER QUALITY OF PUBLIC SPENDING REDISTRIBUTION REGIONS REPRESENTATIVE GOVERNMENT RESOURCE CURSE REVENUE REVENUE ADMINISTRATION REVENUE COLLECTION REVENUE MANAGEMENT REVENUE VOLATILITY REVENUES SERVICE DELIVERY SERVICES SHARE SMALL BUSINESSES STATE STATE AID STATE TAX STATES SUB-NATIONAL SUBNATIONAL SUBSIDIES TAX TAX ADMINISTRATION TAX ADMINISTRATION CAPACITY TAX BASE TAX EFFORT TAX EVASION TAX POLICY TAX REVENUE TAX REVENUES TAXATION TAXES TAXPAYERS TOTAL ENROLLMENT TOTAL TAX REVENUE TRANSPARENCY URBANIZATION
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100428155741 http://hdl.handle.net/10986/3774

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Summary:	This paper proposes that, to increase the efficiency of public spending in oil-rich economies, some or all of the oil revenues be transferred to citizens, and fiscal instruments such as taxation be used to finance public expenditures. The authors develop the case as follows. First, they confirm the well-known result that public-expenditure efficiency is lower in oil-rich countries compared with other developing countries. Second, they show that this efficiency gap is associated with differences in accountability to citizens of government's spending decisions. They find that various measures of accountability are systematically weaker in oil-rich countries. They attribute this difference to the fact that oil revenues typically accrue directly to the government, unlike tax revenues, which pass through the hands of citizens. Third, they show that, controlling for a number of factors, accountability is stronger in countries that rely more on direct taxation to finance public spending. They conclude that accountability, and hence public expenditure efficiency, can be increased by transferring oil revenues to citizens and then taxing them to finance public spending. The paper reviews existing schemes that redistribute oil revenues to the population, such as the Alaska Citizen Fund, to assess the feasibility of a modest proposal in African countries. The authors conclude that, while it may be difficult to implement such a proposal in existing oil producers, there is scope for introducing it in some of Africa's new oil producers.

Increasing Public Expenditure Efficiency in Oil-rich Economies : A Proposal

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