TY - JOUR
T1 - Saving Alberta's resource revenues
T2 - Role of intergenerational and liquidity funds
AU - van den Bremer, Ton S.
AU - van der Ploeg, Frederick
PY - 2016/12/1
Y1 - 2016/12/1
N2 - We use a welfare-based intertemporal stochastic optimization model and historical data to estimate the size of the optimal intergenerational and liquidity funds and the corresponding resource dividend available to the government of the Canadian province Alberta. To first-order of approximation, this dividend should be a constant fraction of total above- and below-ground wealth, complemented by additional precautionary savings at initial times to build up a small liquidity fund to cope with oil price volatility. The ongoing dividend equals approximately 30 per cent of government revenue and requires building assets of approximately 40 per cent of GDP in 2030, 100 per cent of GDP in 2050 and 165 per cent in 2100. Finally, the effect of the recent plunge in oil prices on our estimates is examined. Our recommendations are in stark contrast with historical and current government policy.
AB - We use a welfare-based intertemporal stochastic optimization model and historical data to estimate the size of the optimal intergenerational and liquidity funds and the corresponding resource dividend available to the government of the Canadian province Alberta. To first-order of approximation, this dividend should be a constant fraction of total above- and below-ground wealth, complemented by additional precautionary savings at initial times to build up a small liquidity fund to cope with oil price volatility. The ongoing dividend equals approximately 30 per cent of government revenue and requires building assets of approximately 40 per cent of GDP in 2030, 100 per cent of GDP in 2050 and 165 per cent in 2100. Finally, the effect of the recent plunge in oil prices on our estimates is examined. Our recommendations are in stark contrast with historical and current government policy.
KW - Fiscal policy
KW - Oil price volatility
KW - Precautionary saving
KW - Resource wealth
UR - http://www.scopus.com/inward/record.url?scp=84991660770&partnerID=8YFLogxK
U2 - 10.1016/j.enpol.2016.09.032
DO - 10.1016/j.enpol.2016.09.032
M3 - Article
AN - SCOPUS:84991660770
SN - 0301-4215
VL - 99
SP - 132
EP - 146
JO - Energy Policy
JF - Energy Policy
ER -