This paper surveys aspects of the empirical and theoretical debate over the effects of foreign
resource inflows on the national saving, investment, and growth of developing countries. The
paper suggests a methodology for systematically studying the effects of resource inflows, based
on standard optimal growth models modified for consistency with key empirical macro
relations. A fairly robust normative implication even of representative-agent optimal
consumption models is that much if not most of extra permanent resources should be consumed
rather than invested.
