PETROLEUM WEALTH, DEBT POLICY, AND INTERGENERATIONAL WELFARE - THE CASE OF NORWAY

What happens to the welfare of present and future generations in Norway if the petroleum wealth of the central government is consumed in the course of the next 40 years ? By simulating a computable overlapping-generations model, this paper illustrates the magnitudes that are likely to be involved. Due to the Norwegian government's huge wealth, the scope for intergenerational redistribution through debt policy is much greater in Norway than in most other countries in the OECD. Our results indicate that a wealth consumption policy has serious and long-lasting negative effects on the welfare of the present very young generations and generations that are not yet born.