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Escaping the Resource Curse and the Dutch Disease? When and Why Norway Caught up with and Forged ahead of Its Neighbors

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Author Info
Erling Røed Larsen (Statistics Norway)
Abstract

In the 1960s, Norway lagged behind its Scandinavian neighbors in the aggregate value of economic production per capita, as it had for decades. By the 1990s, Norway had caught up with and forged ahead of Denmark and Sweden. When and why did Norway catch up? The discovery and extraction of oil in the early 70s is usually suggested as the explanation. But oil alone cannot explain Norway's growth since Sachs and Warner (2001) show that resource-gifts often reverse growth, making oil a curse not a blessing. Moreover, there is the possibility of contracting the Dutch Disease, which involves a rapid and substantial contraction of the traded goods sector. This article explains how deliberate macroeconomic policy, the arrangement of political and economic institutions, a strong judicial system, and social norms contributed to let Norway escape the Resource Curse and the Dutch Disease for more than two decades. Intriguingly, it appears that Norway in the late 90s may show some symptoms. Norway experiences reversed relative growth compared to Denmark and Sweden and a contraction of industrial activity. This article explores the political economy behind this recent slow-down.

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Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 377.

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Date of creation: May 2004
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Handle: RePEc:ssb:dispap:377

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Keywords: booming sector; catch-up; comparative development; counterfactual path; Dutch Disease; economic parity; economic growth; factor movement; gross domestic product; industry; manufacturing; rent seeking; Resource Curse; oil discovery; political economy; spending effect; spillover-loss;

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Find related papers by JEL classification:
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
N10 - Economic History - - Macroeconomics and Monetary Economics; Growth and Fluctuations - - - General, International, or Comparative
O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Persson, Torsten & Tabellini, Guido, 1997. "Political Economics and Macroeconomic Policy," CEPR Discussion Papers 1759, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Torvik, Ragnar, 2002. "Natural resources, rent seeking and welfare," Journal of Development Economics, Elsevier, vol. 67(2), pages 455-470, April. [Downloadable!] (restricted)
  3. Paldam, Martin, 1997. "Dutch disease and rent seeking: The Greenland model," European Journal of Political Economy, Elsevier, vol. 13(3), pages 591-614, September. [Downloadable!] (restricted)
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  5. Gylfason, Thorvaldur & Herbertsson, Tryggvi Thor & Zoega, Gylfi, 1997. "A Mixed Blessing: Natural Resources and Economic Growth," CEPR Discussion Papers 1668, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  6. Corden, W M, 1984. "Booming Sector and Dutch Disease Economics: Survey and Consolidation," Oxford Economic Papers, Oxford University Press, vol. 36(3), pages 359-80, November. [Downloadable!] (restricted)
  7. Chatterji, Monojit & Price, Simon, 1988. "Unions, Dutch Disease and Unemployment," Oxford Economic Papers, Oxford University Press, vol. 40(2), pages 302-21, June. [Downloadable!] (restricted)
  8. Dani Rodrik, 1994. "Getting Interventions Right: How South Korea and Taiwan Grew Rich," NBER Working Papers 4964, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Usui, Norio, 1997. "Dutch disease and policy adjustments to the oil boom: a comparative study of Indonesia and Mexico," Resources Policy, Elsevier, vol. 23(4), pages 151-162, December. [Downloadable!] (restricted)
  11. Gylfason, Thorvaldur, 2001. "Nature, Power, and Growth," Scottish Journal of Political Economy, Scottish Economic Society, vol. 48(5), pages 558-88, November. [Downloadable!] (restricted)
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  12. Auty, Richard M., 2001. "The political economy of resource-driven growth," European Economic Review, Elsevier, vol. 45(4-6), pages 839-846, May. [Downloadable!] (restricted)
  13. Torvik, Ragnar, 2001. "Learning by doing and the Dutch disease," European Economic Review, Elsevier, vol. 45(2), pages 285-306, February. [Downloadable!] (restricted)
  14. Auty, R. M., 2001. "Transition reform in the mineral-rich Caspian region countries," Resources Policy, Elsevier, vol. 27(1), pages 25-32, March. [Downloadable!] (restricted)
  15. Baland, Jean-Marie & Francois, Patrick, 2000. "Rent-seeking and resource booms," Journal of Development Economics, Elsevier, vol. 61(2), pages 527-542, April. [Downloadable!] (restricted)
  16. Corden, W Max & Neary, J Peter, 1982. "Booming Sector and De-Industrialisation in a Small Open Economy," Economic Journal, Royal Economic Society, vol. 92(368), pages 825-48, December. [Downloadable!] (restricted)
  17. Brunstad, Rolf Jens & Dyrstad, Jan Morten, 1997. "Booming Sector and Wage Effects: An Empirical Analysis on Norwegian Data," Oxford Economic Papers, Oxford University Press, vol. 49(1), pages 89-103, January. [Downloadable!] (restricted)
  18. Sachs, Jeffrey D. & Warner, Andrew M., 2001. "The curse of natural resources," European Economic Review, Elsevier, vol. 45(4-6), pages 827-838, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Luis Felipe Céspedes C. & David Rappoport W, 2006. "El Fondo Gubernamental de Petróleo de Noruega," Notas de Investigación Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 9(1), pages 71-78, April. [Downloadable!]
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