Saving Alberta’s Resource Revenues

Frederick (Rick) van der Ploeg and Ton van den Bremer

No 179, OxCarre Working Papers from Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford

Abstract: 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.

Keywords: oil price volatility; precautionary saving; resource wealth; fiscal policy (search for similar items in EconPapers)
JEL-codes: D91 E21 E22 Q32 (search for similar items in EconPapers)
Date: 2016-09-30
New Economics Papers: this item is included in nep-ene and nep-mac
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Citations: View citations in EconPapers (2)

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