The other side of the coin: The downside of Norway’s savings of petroleum rents Rögnvaldur Hannesson Norwegian School of Economics

Background Oil discovered in Norway in 1969 by Phillips Petroleum of Oklahoma Events in made North Sea oil highly profitable High taxes on oil from 1975 Petroleum savings fund 1990, first deposit

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Three savings rules R - rW total (Hicks’ permanent income) R - (r-g)W total (Hicks’ rule per capita) R - rW fund (Norwegian savings rule; r = 4%) W fund < W total 4

5 r = 4% g = 0.9%

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7 Transport 2 = Central government Transport 1 = All expenditure

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Three questions/conclusions How much can cleverly designed institutions achieve? Difficult to separate use of oil money from general economic/political perceptions Is the Norwegian experience anything for poor countries to emulate? 9