Segal, P. (2011) ‘Resource Rents, Redistribution, and Halving Global Poverty: The Resource Dividend'

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Under Precept 7 a major trade-off that arises when government seeks to foster domestic investment is whether to use revenues for current expenditure or invest them in the future. As a general principle, a substantial proportion of revenues ought to be saved, combined with moderate immediate consumption. The paper by Segal makes the case that the best policy choice is to distribute resource revenue through dividends for citizens.

The paper begins with the premise that natural resources belong to all citizens of a country and not a select elite. As such, the argument is made that the distribution of a country’s resource rents between all citizens through unconditional cash transfers (sometimes called a “resource dividend”), is the most equitable policy choice. Supporting this argument, the author presents evidence that if all developing countries had adopted the resource dividend approach, global poverty would have been cut by between 44 per cent and 66 per cent each year 2004 – 2006. 

Adopting a resource dividend would furthermore provide benefits beyond poverty reduction. For instance, the incentive to register with the government to receive the resource dividend would reduce informality and enhance state capacity. Implementation would require administrative procedures similar to mass vaccination programmes which have been effectively carried out in low capacity countries. The author recognizes however that if a government is not effective enough to recuperate tax revenue lost to the resource dividend, yet effective enough for the expenditures that would be cut to genuinely benefit the poor, the resource dividend may not be the best policy.

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