Combating the Oil Curse with Direct Distribution of Oil Revenues
Thomas I. Palley in 2004 proposed a direct distribution of oil funds to Iraqis. He discussed the advantages and disadvantages of this plan and at the end of his analysis, he concludes that for Iraq after Saddam , direct allocation of oil rent is much more better or practical than Alaska experience. In Alaska, the oil revenues invested in financial assets and securities and every year eligible citizens get a dividends of these investments. That is principal amount remain in the fund and guarantee the future trend of funds from investment. That would satisfy the equality of inter-generations.
However, the author of this paper, do not believe that Iraqis environment and institutions are at the proper level and quality of doing similar policy like Alaska.
Currently among Iranian academics and some politicians, this discussion has emerged. what will be the costs and benefits of direct allocation of oil rents to Iranians? Why Alaska efficient system of managing oil rents can not be carry out in Iran? In Iran, alternative policies for managing oil wealth which have experienced by the government are "establishing stabilization oil account" in 2000 and more recently in new government of Ahmadinejad issuing "Justice Shares" among specific groups of society. However, both of them , proved real shortfalls. Stabilization Account which initially aimed to protect the government main revenues from external shocks in oil markets ( about 80% of Iranian foreign exchange revenues come from oil exports and 20 percent of GDP is Oil GDP) was more or less successful , at least for some initial years after establishment. This can be the reason behind one of our results in this study showing insignificant response of government expenditures to asymmetric oil price shocks. However, lack of transparency and accountability of state on withdraw from OSF has made this key tool inefficient. Justice Shares plan also proved very challenging for managing and lack of developed capital market and culture and knowledge of trading in stock exchange market has not benefited target groups of this plan.
However, the topic of direct distribution of oil revenues has remained to a large extent unexplored. As far as I am aware, there is not a clear theoretical or empirical study or even a real experiment of this plan in a country.
You can read the paper of Thomas I. Palley here.
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