Natural Resources Revenue Allocation: A Dynamic General Equilibrium Approach

The purpose of this paper is to investigate the economic impacts of inter-generational allocation of exhaustible natural resources. We quantify the potential impacts of implementing this on oil and gas revenues in Iran. We employ an overlapping-generations computable general equilibrium model which is calibrated based on the 2010 Iranian Micro Consistent Matrix. We assume an open economy with different sectors such as oil and gas, public services, and other activities. Assuming exhaustible resources, we measure the impact of different annual saving rates for the Resources Revenue on welfare, size of the public sector, activity levels, and exports. We find that investing the revenue of oil and gas in Iran, will lead to a 55% higher annual growth rate in the long-run.