Oil Stock Discovery and Dutch Disease

Kirk Hamilton and John M. Hartwick

No 1163, Working Papers from Queen's University, Department of Economics

Abstract: We set out a model of a small open economy exporting oil and a traditional exportable in return for produced capital. The small open economy also has local production of a non-traded good. We first observe that the size of the traditional export sector declines with an exogenous increase in the country's oil stock. Strong Dutch disease (SDD) involves a net diminution in produced capital in use in the small open economy after the oil discovery shock. SDD turns on the exportable sector being relatively capital intensive.

Keywords: Dutch disease; resource discovery; invariant earnings (search for similar items in EconPapers)
JEL-codes: F43 Q33 Q32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene and nep-opm
Date: 2008-03
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Working Paper: Oil Stock Discovery and Dutch Disease (2009)
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