Testing the Dutch disease: the impact of natural resources extraction on the manufacturing sector

Crawford School of Public Policy | Arndt-Corden Department of Economics

Event details

PhD Seminar (Econ)

Date & time

Friday 11 May 2018


Seminar Room 1, Level 1, Stanner Building 37, Lennox Crossing, ANU


Donny Pasaribu, PhD Scholar, Crawford School, ANU.


Arndt-Corden Department of Economics

Empirical evidence of the Dutch disease in manufacturing has been mixed and inconclusive. This research tests Dutch disease theory by measuring the impact of natural resource rents on manufacturing value added. This is done in a cross-country setting using an instrumental variable method that utilises fluctuations in world resource prices, weighted by each country’s resource exports. The research finds that, contrary to the prediction of Dutch disease, increases in natural resource rent have a mild positive impact on manufacturing value added. The findings imply that it is possible for developing countries to develop manufacturing and resource extracting sector simultaneously, thus avoiding the Dutch disease.

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