Dutch disease, unemployment and structural change

Mariano Kulish, James Morley, Nadine Yamout and Francesco Zanetti

Economic Inquiry, 2026, vol. 64, issue 3, 976-1004

Abstract: We find that Dutch disease effects on unemployment are small even in a commodity‐rich economy like Australia. Using an estimated open‐economy model with frictional unemployment, we quantify how business‐cycle shocks and structural changes shape aggregate unemployment. A permanent rise in commodity prices in the 2000s appreciated the real exchange rate and temporarily increased unemployment, but its effect was offset by a gradual, secular decline in the disutility of work in the non‐tradable sector, a key driver of long‐run structural change. Shifting preferences toward non‐tradables, together with non‐commodity shocks, account for most of the observed unemployment dynamics.

Date: 2026
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