Devarajan, ShantayananLe, Tuan MinhRaballand, Gaël2012-03-192012-03-192010-04-01https://hdl.handle.net/10986/3774This paper proposes that, to increase the efficiency of public spending in oil-rich economies, some or all of the oil revenues be transferred to citizens, and fiscal instruments such as taxation be used to finance public expenditures. The authors develop the case as follows. First, they confirm the well-known result that public-expenditure efficiency is lower in oil-rich countries compared with other developing countries. Second, they show that this efficiency gap is associated with differences in accountability to citizens of government's spending decisions. They find that various measures of accountability are systematically weaker in oil-rich countries. They attribute this difference to the fact that oil revenues typically accrue directly to the government, unlike tax revenues, which pass through the hands of citizens. Third, they show that, controlling for a number of factors, accountability is stronger in countries that rely more on direct taxation to finance public spending. They conclude that accountability, and hence public expenditure efficiency, can be increased by transferring oil revenues to citizens and then taxing them to finance public spending. The paper reviews existing schemes that redistribute oil revenues to the population, such as the Alaska Citizen Fund, to assess the feasibility of a modest proposal in African countries. The authors conclude that, while it may be difficult to implement such a proposal in existing oil producers, there is scope for introducing it in some of Africa's new oil producers.CC BY 3.0 IGOACCOUNTABILITYACCOUNTABILITY OF PUBLIC SPENDINGACCOUNTINGANNUAL BUDGETSBANK POLICYBUDGETBUDGETARY OPERATIONSBUREAUCRACYCENTRAL GOVERNMENTCHECKSCITIZENSCIVIL SERVICECONSENSUSCONSTITUENCIESCONSUMPTION EXPENDITURECONTRACTCORRUPTIONCREDIBILITYDEFICITDEMOCRACYDEMOCRATIC PROCESSDEVELOPING COUNTRIESDISCLOSUREDISTRICTSDOMESTIC REVENUEDOMESTIC TAXATIONECONOMIC ANALYSISECONOMIC DEVELOPMENTECONOMIC GROWTHEDUCATION SPENDINGEFFICIENCY IN PUBLIC SPENDINGEFFICIENCY OF PUBLIC SPENDINGEXCHANGEEXPENDITURE CONTROLEXPENDITURE CONTROL SYSTEMSEXPENDITURE CONTROLSEXPENDITURE EFFICIENCYEXPENDITURE PER CAPITAEXTERNAL FUNDINGFEESFINANCEFISCALFISCAL DECENTRALIZATIONFISCAL FEDERALISMFISCAL PERFORMANCEFISCAL STABILIZATIONFORECASTINGFUTUREGLOBALIZATIONGOODGOOD GOVERNANCEGOVERNANCEGOVERNANCE INDICATORSGOVERNMENT ACCOUNTABILITYGOVERNMENT INVESTMENTGOVERNMENT SPENDINGGOVERNMENTSGROSS DOMESTIC PRODUCTHOLDINGHUMAN CAPITALINCENTIVESINCOME TAXESINDEPENDENCEINFRASTRUCTUREINSTITUTIONAL ARRANGEMENTSINSTITUTIONAL CONSTRAINTSINSTRUMENTSINTERESTINTERESTSINTERNATIONAL BANKINTERNATIONAL STANDARDINVESTMENTLACK OF ACCOUNTABILITYLEVEL OF TAXATIONLIENLOCAL TAXMACROECONOMIC STABILITYMEDIUM-TERM EXPENDITUREMEDIUM-TERM EXPENDITURE FRAMEWORKSNATIONSNATURAL RESOURCESOIL BOOMOIL BOOMSOIL PRICESOIL PRODUCTSOIL RESERVESOIL RESOURCESOPTIONOUTCOMESPERPERMANENT INCOME HYPOTHESISPERSONAL INCOMEPERSONAL INCOME TAXPOLICY FORMULATIONPOLICY FRAMEWORKPOLICY MAKERSPOLICY RECOMMENDATIONSPOLICY VARIABLESPOLITICAL ECONOMYPOLITICAL FEASIBILITYPOLITICIANSPOVERTYPROPERTYPROPERTY TAXESPUBLICPUBLIC BUDGETINGPUBLIC BUDGETSPUBLIC EDUCATIONPUBLIC EDUCATION EXPENDITUREPUBLIC EXPENDITUREPUBLIC EXPENDITURE EFFICIENCYPUBLIC EXPENDITURE REVIEWSPUBLIC EXPENDITURESPUBLIC FUNDSPUBLIC GOODSPUBLIC OVERSIGHTPUBLIC POWERPUBLIC RESOURCESPUBLIC SERVICESPUBLIC SPENDINGPUBLIC SPENDING LEVELSPURCHASING POWERQUALITY OF PUBLIC SPENDINGREDISTRIBUTIONREGIONSREPRESENTATIVE GOVERNMENTRESOURCE CURSEREVENUEREVENUE ADMINISTRATIONREVENUE COLLECTIONREVENUE MANAGEMENTREVENUE VOLATILITYREVENUESSERVICE DELIVERYSERVICESSHARESMALL BUSINESSESSTATESTATE AIDSTATE TAXSTATESSUB-NATIONALSUBNATIONALSUBSIDIESTAXTAX ADMINISTRATIONTAX ADMINISTRATION CAPACITYTAX BASETAX EFFORTTAX EVASIONTAX POLICYTAX REVENUETAX REVENUESTAXATIONTAXESTAXPAYERSTOTAL ENROLLMENTTOTAL TAX REVENUETRANSPARENCYURBANIZATIONWorld Bank10.1596/1813-9450-5287