Kiel Working Papers, Kiel Institute for World Economics
No 1623:
Oil revenues for public investment in Africa: targeting urban or rural areas?
Marcus Böhme, Clemens Breisinger, Rainer Schweickert and Manfred Wiebelt
Abstract: This paper investigates the effects of oil financed public
investment on poverty using a dynamic multisectoral general equilibrium
model featuring inter-temporal productivity spillovers, which may exhibit a
sector-specific and regional bias. In general, the results bear out the
expectation that a surge of oil revenues leads to a real appreciation,
distorting incentives which favor nontradable activities over export
agriculture and manufacturing thereby increasing rural and national
poverty. Whereas this result is familiar from other recent studies, the
simulations show that beyond the short run, when conventional demand-side
Dutch disease effects are present, the relationship between resource-rent
flows and real exchange rates, output growth, and poverty is less
straightforward than simple models of the "resource curse" suggest. Taking
Ghana as a stylized agriculture-based economy with poverty most pronounced
in a region with home biased agricultural production, a policy mix of
smoothing the real exchange rate shock and an allocation of infrastructure
spending in rural areas seems to be the most promising public investment
strategy to enhance growth and reduce poverty
Keywords: oil revenue, public investment, productivity, Africa, agricultural development, poverty; (follow links to similar papers)
JEL-Codes: H4,; O5,; Q3; (follow links to similar papers)
31 pages, May 2010
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