Abstract
Rent allocation is key to natural-resource rich countries' development. A life cycle model is used to study optimal rent allocation considering the uncertainties derived from government quality and rent measurement. Chile's private copper industry is used as a case study. Results show that between 1988 to 2018 roughly USD 161.7 billion of copper rent has been allocated to the private sector, which accounts for 62.6% of the total rent generated by the industry. Given the quality of Chile's government (i.e., level of accountability, political stability, effectiveness, regulatory quality, control over corruption, and adherence to the rule of law), rent allocation has likely been suboptimal and institutional change is likely warranted.
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