Abstract
This paper argues that hydrocarbon producers with high rents per capita constitute a specific category in the broader universe of rent-dependent countries, facing a specific set of development challenges that are not shared by mid-rent countries. It surveys patterns of rent distribution in high-rent countries (HRCs), focusing on energy subsidies and excessive public employment, and argues that these result in declining energy efficiency and labor productivity as well as exclusion of nationals from the private labor market. It then proposes unconditional cash grants for HRC citizens in combination with subsidy and public employment reform as a mitigation strategy to minimize the HRC-specific distortive effects of rent distribution. It is shown that none of the conventional counterarguments to unconditional cash grants applies in the context of HRCs.
Highlights
The discussion on the ‘‘resource curse’’ has increasingly moved into the terrain of policy prescriptions
This paper seeks to add to the growing literature on cash grants in rentier states by focusing on their potential impact in a particular class of resource-rich states in the developing world: countries with very high per capita resource rents, which are starting to be recognized as a category of their own [1,2,3]
The second half of the paper makes the case that direct cash grants for high-rent countries (HRCs) citizens are a more economically efficient, fair, and politically palatable distributive tool that should replace excess government employment and energy subsidies. The case for such a ‘‘citizens’ income’’ is even stronger for HRCs than for mid-rent countries: while retaining most of the redeeming features that cash grants are argued to have in the rentier state universe at large, they would be easier to finance and justify, involve less acute trade-offs, and most importantly help overcome HRCspecific development challenges
Summary
The discussion on the ‘‘resource curse’’ has increasingly moved into the terrain of policy prescriptions. An earlier version of this article was published as LSE working paper: eprints.lse.ac.uk/67381/ Such high-rent countries (or HRCs)—a limited number of mostly small-population resource exporters in the developing world—face somewhat different, yet in many ways as daunting development challenges as the mid-rent countries on which much of the resource curse debate has traditionally focused. These challenges, which have never been systematically analyzed, are surveyed in the first half of this paper, focusing in particular on excessive public employment and provision of energy subsidies, both of which are deeply economically distortive.
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