Oil Revenues and Welfare Policies; Lessens from some Oil-Riche Countries

Although all countries have some welfare programs, these programs are different in quantity, quality, and achieving their goals. One of the determinant factors for this difference is the program’s financing sources. They are usually financed by taxes, public revenues, and revenues from selling natural resources. Oil-rich countries, including Iran, due to having oil revenues, provide a special welfare system. Howbeit, in some other oil-rich countries, such as Norway, welfare programs have had different outcomes. The paper deals with the factors which determine these differences.

As, in order to investigate the above-mentioned objective, we need some data obtained from the official reports related to the subject, the document review is the method used.

According to the results, one of the main influencing factors related to how managing oil revenues and the way of allocating it to the welfare areas, is a pre-existent condition, that is, having strong and efficient institutions and a development level that the country had had before the entering oil revenues into countries’ public budget. Moreover, the level of policy-makers and political elites’ commitment to the welfare of future generations is the other significant factor in this field. The so-called rentier states spend oil revenues more generously and liberally for the welfare of the current generation and pay less attention to the modernization of their taxation system. Therefore, welfare benefits do not have a distributional role in a society and income distribution does not take place properly. So, these countries usually suffer from high inequality