The Distribution of Natural Resource Rents and the Dutch Disease
We show that the Dutch disease can arise solely because of the distribution of the natural resource rents. In particular, a less equal distribution of the natural resource rents can generate manufacturing sector stagnation and lower long-run growth even for a country with a smaller resource base and (initially) higher manufacturing productivity. In our framework the Dutch disease arises through a shift in demand. The new found wealth from the resource find increases demand for non-tradable luxury consumption services. Labor that could be used to develop the manufacturing sector is pulled into the service sector. Manufactured goods are more likely to be imported and the learning and production process improvements accrue to the foreign exporters. As opposed to conventional models where income distribution has no effect on economic outcomes, an unequal distribution of the resource wealth can generate or further intensify the Dutch disease dynamics within this framework.
Year of publication: |
2014-10
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Authors: | Chisik, Richard ; Battaile, Bill ; Onder, Harun |
Institutions: | Department of Economics, Ryerson University |
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