Is the Dutch disease well and alive? A cross-country assessment of mining spillovers on employment in the 2002–2014 period

Beatriz Calzada Olvera

Resources Policy, 2024, vol. 95, issue C

Abstract: Following the Dutch disease model of Corden and Neary (1982), the expansion of a booming extractive sector crowds out employment in key sectors, i.e., manufacturing. To this day, these potential negative labor spillovers remain a cause of concern for policymakers. Empirical literature has explored this question by focusing on regional dynamics of employment, but country-wide effects remain understudied. This paper explores the mining sector's employment spillovers at the national level over the 2002–2014 period. Using data from WIOD, we employ Moretti's (2010) specification, as extended in Fleming and Measham (2014), and adopt a GMM model to address potential endogeneity issues. Following the decomposition in Foster-McGregor (2019), we differentiate mining employment expansion based on a) changes in domestic demand and b) changes due to exports. Along with regional studies, our results indicate that there is no evidence of negative spillovers on manufacturing jobs, regardless of the source of mining jobs expansion (domestic or exports). Such results hold even in countries with relatively low levels of manufacturing output. We do find some evidence of negative effects in agriculture, and positive effects on construction and services; this, however, seems to hold only in countries with relatively low manufacturing output. Findings also suggest that positive elasticities at the national level, when observed, are quite moderate: e.g., a 10% increment in mining employment leads to a 1.1%–1.4% increment in construction employment.

Keywords: Dutch disease; Mining; Extractive sectors; Employment spillovers; Elasticities (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:95:y:2024:i:c:s0301420724005038

DOI: 10.1016/j.resourpol.2024.105136

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