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Services, Inequality, and the Dutch Disease / Battaile, Bill
World Bank Open Knowledge Repository (formerly "World Bank E-Library Publications") Available online
View online- Format:
- Book
- Government document
- Author/Creator:
- Battaile, Bill
- Series:
- Policy research working papers.
- World Bank e-Library.
- Language:
- English
- Subjects (All):
- Contamination.
- Currencies and Exchange Rates.
- E-Business.
- Economic Theory & Research.
- Emerging Markets.
- Finance and Financial Sector Development.
- Fixed Effect Model.
- Internet Adoption.
- Labor Policies.
- Macroeconomics and Economic Growth.
- Paper Consumption.
- Private Sector Development.
- Social Protections and Labor.
- Local Subjects:
- Contamination.
- Currencies and Exchange Rates.
- E-Business.
- Economic Theory & Research.
- Emerging Markets.
- Finance and Financial Sector Development.
- Fixed Effect Model.
- Internet Adoption.
- Labor Policies.
- Macroeconomics and Economic Growth.
- Paper Consumption.
- Private Sector Development.
- Social Protections and Labor.
- Physical Description:
- 1 online resource (22 pages)
- Place of Publication:
- Washington, D.C., The World Bank, 2014
- System Details:
- data file
- Summary:
- 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.
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