Dutch Disease Resistance: Evidence from Indonesian Firms

James Cust, Torfinn Harding and Pierre-Louis Vézina

Journal of the Association of Environmental and Resource Economists, 2019, vol. 6, issue 6, 1205 - 1237

Abstract: Oil and gas windfalls may lead to the Dutch disease, that is, the crowding out of the manufacturing sector due to rising wages when labor is drawn to the expanding sectors. In this paper, we exploit the fact that oil and gas discoveries contain an element of luck as well as oil price fluctuations to capture exogenous variation in oil and gas windfalls across Indonesia and identify their effects on manufacturing firms. We find that oil and gas windfalls on average cause wages as well as firms’ labor productivity, output, and employment to increase, while product unit values and exit rates are unaffected. Heterogeneity analysis reveals that the least productive firms are more likely to exit, and surviving low-productivity firms see relatively large expansions in output and labor productivity, while high-productivity firms see relatively high expansions in employment.

Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
http://dx.doi.org/10.1086/705547 (application/pdf)
http://dx.doi.org/10.1086/705547 (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
Working Paper: Dutch Disease Resistance: Evidence from Indonesian Firms (2017)
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:ucp:jaerec:doi:10.1086/705547

Access Statistics for this article

More articles in Journal of the Association of Environmental and Resource Economists from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().