Can natural resources revenue start industrialization? (A model for Dutch disease)

Saleh Ghavidel Doostkouei (), Khosro Azizi () and Abdolreza Talaneh ()
Additional contact information
Saleh Ghavidel Doostkouei: Islamic Azad University
Khosro Azizi: Islamic Azad University
Abdolreza Talaneh: Islamic Azad University, Firoozkooh Branch

SN Business & Economics, 2023, vol. 3, issue 1, 1-31

Abstract: Abstract We present a model of Dutch disease in which revenue from natural resources is spent on the imports of intermediate and final goods. In the previous study of the Dutch disease model, the natural resources’ revenue is allocated only to the imports of final goods. We simulated Dutch disease according to Resource Movement Effect (RE) and Spending Effect (SE) in both primary and expanded models. The result shows that real appreciation is higher, and de-industrialization status is ambiguous if the revenue of natural resources is allocated to the imports of intermediate and final goods, and intermediate goods as an input in the production of the tradable sector. In other words, there is no guarantee that with the income of natural resources, a country will be industrialized. Real depreciation may occur if the natural resources revenue is invested in the non-tradable sector. The fluctuations of the real exchange rate in natural resource-rich countries are higher than in other countries when they are allocating revenue of natural resources to the imports of intermediate and final goods. This policy is more difficult for countries whose share of natural resources in GDP is more than 7%.

Keywords: Dutch disease; Natural resources booms; Industrialization (search for similar items in EconPapers)
JEL-codes: F30 P28 Q30 Q33 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s43546-022-00379-z Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:snbeco:v:3:y:2023:i:1:d:10.1007_s43546-022-00379-z

Ordering information: This journal article can be ordered from
https://www.springer.com/journal/43546

DOI: 10.1007/s43546-022-00379-z

Access Statistics for this article

SN Business & Economics is currently edited by Gino D'Oca

More articles in SN Business & Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().