Oil rent and the breakdown of Ricardian equivalence: empirical evidence from Algeria

This study examines the wealth effect of oil rents on household consumption in Algeria and assesses whether households behave according to the Ricardian hypothesis. Using annual data from 1980 to 2023 and an ARDL model, we find that in the short term, household consumption responds immediately to changes in operating expenditures, indicating non-Ricardian behavior: households adjust their spending based on current public revenues rather than offsetting future taxes. Ordinary taxation, by contrast, has no immediate direct effect, but its lagged impacts are significant, confirming the delayed transmission of fiscal policy. This is consistent with the results observed for oil-related taxation, which has an immediate effect on consumption, highlighting the key role of hydrocarbons and the insensitivity of households to ordinary taxes. Finally, in the long run, household consumption responds positively to operating expenditures, further confirming the non-Ricardian behavior of Algerian households.