The Dutch disease revisited: consistency of theory and evidence

Arsham Reisinezhad ()
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Arsham Reisinezhad: University of Essex

Environmental & Resource Economics, 2024, vol. 87, issue 3, No 1, 553-603

Abstract: Abstract The Dutch disease literature reveals several gaps between empirical evidence and theoretical predictions. To bridge such gaps, I develop a model that accounts for uneven spillovers of technological progress from the resource sector to other domestic sectors. I then employ a dynamic panel approach to align the theory with the data. I find that the real exchange rate appreciation resulting from a resource boom (i.e., the spending channel) is more pronounced in resource-poor countries than in resource-rich countries. Additionally, the resource movement channel exhibits differences between resource-rich and resource-poor countries. In resource-rich countries, a resource boom reduces the growth rate in the manufacturing sector more than in the service sector, leading to a decrease in relative sectoral output and a slowdown in economic growth. On the other hand, in resource-poor countries, a resource boom accelerates the growth of the manufacturing sector and decelerates the growth of the service sector, resulting in an increase in relative sectoral output and economic growth.

Keywords: Resource boom; Dutch disease; Real exchange rate; Sectoral output; Economic growth; Resource-rich and poor countries (search for similar items in EconPapers)
JEL-codes: C33 O11 O13 O15 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10640-023-00827-w

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