FEEM working papers "Note di lavoro" series
2015 .096

The Basilicata Wealth Fund: Resource Policy and Long-run Economic Development in Southern Italy


Autori: Roberto Iacono
Serie: Climate Change and Sustainable Development
Editor: Carlo Carraro
Parole chiave: Exhaustible Natural Resources, Sovereign Wealth Fund, Regional Economy, Long-run Economic Development, Basilicata
Numero JEL: O13, Q32, R11, R58

Abstract

This paper contributes to the growing political economy literature of within-country natural resources management, by proposing a new resource policy for the oil-rich southern Italian region of Basilicata. The policy proposal is to establish a (regional) wealth fund in which all the royalty revenues from non-renewable natural resource exploitation in Basilicata would be stored and fully converted into low-risk  financial assets. The scope is to give priority to long-run investments as to better exploit revenues from large-scale extraction of natural capital. Establishing a wealth fund at the regional sub-national level is a novel approach that can be applied to other resource-rich regions in the world. I label the fund as the Basilicata Wealth Fund (BWF). The BWF would be a regionally owned investment fund, however  independently administered from national authorities (for instance, as an independent legal entity under the jurisdiction of the Bank of Italy). In addition, the paper posits a transparent and clear-cut spending fiscal rule in order to let regional authorities use the resource revenues to finance economic policy. The clear advantage from the BWF would be the stronger focus on long-run economic development and the higher accountability, hence avoiding misuse of resource revenues for myopic fiscal spending.

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Suggested citation: Iacono, R., (2015), 'The Basilicata Wealth Fund: Resource Policy and Long-run Economic Development in Southern Italy', Nota di Lavoro 96.2015, Milan, Italy: Fondazione Eni Enrico Mattei
 

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