Dutch Disease: the perverse effects of a resource boom in a small open economy
Thesis/Dissertation
·
OSTI ID:5705556
The welfare and factor-allocation effects of a resource boom in a small open economy are studied. Variations of a two-sector general-equilibrium model are developed where the movement of factors of production between the traded (manufacturing) and the nontraded (service) sectors provide the basis for the analysis of Dutch Disease. Such factor movement is due to a resource boom, which is thought of as increased transfer income from abroad. Assuming price and wage flexibility, perfect mobility of factors of production, and perfect foresight, the welfare effects of a resource boom are studied under the following assumptions: external economies in the production of the traded good, imperfect competition in the market for the traded good, the existence of a distortionary wage tax system, and the presence of unobservability and asymmetric information in the market for nonhomogeneous labor. It is shown that given some conditions, introducing each of the above assumptions may bring about a negative-welfare effect resulting from the relative contraction of the traded sector due to a resource boom.
- Research Organization:
- Pennsylvania Univ., Philadelphia (USA)
- OSTI ID:
- 5705556
- Country of Publication:
- United States
- Language:
- English
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