 Services, inequality, and the dutch diseaseBill Battaile, Richard Chisik and Harun Onder No 6966, Policy Research Working Paper Series from The World Bank Abstract: This paper shows how Dutch disease effects may arise solely from a shift in demand following a natural resource discovery. The natural resource wealth increases the demand for non-tradable luxury services due to non-homothetic preferences. Labor that could be used to develop other non-resource tradable sectors is pulled into these service sectors. As a result, manufactures and other tradable goods are more likely to be imported, and learning and productivity improvements accrue to the foreign exporters. However, once the natural resources diminish, there is less income to purchase the services and non-resource tradable goods. Thus, the temporary gain in purchasing power translates into long-term stagnation. As opposed to conventional models where income distribution has no effect on economic outcomes, an unequal distribution of the rents from resource wealth further intensifies the Dutch disease dynamics within this framework. Keywords: Economic Theory&Research; Currencies and Exchange Rates; Labor Policies; E-Business; Emerging Markets (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:6966 Access Statistics for this paper More papers in Policy Research Working Paper Series from The World Bank 1818 H Street, N.W., Washington, DC 20433. Contact information at EDIRC. |
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