The allocation of royalties from oil extraction: an ex-post evaluation

The aim of this paper is to provide an ex-post evaluation of the allocation of royalties from oil extraction in the Basilicata region. The allocation of oil royalties accruing to the regional Government (€990 M€ up to 2013) among different expenditure programs is analyzed. The impact analysis is based on a multi-sector model based on a Social Accounting Matrix (SAM), appropriately implemented for Basilicata region. Results clearly show that the past the allocation of generated a much lower impact than expected in terms of economic growth and employment. Given the structure of the regional economy, much of the impact of investments and running expenses financed by royalties has maybe been lost outside the regional boundaries. A greater effect on income and employment will not be possible unless resources are re-directed towards greater competitiveness of the regional economic system. Better balancing the use of royalties between social expenditure and production investments would probably be the first step towards a strategy of sustainable development of the regional economy.