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The Dutch disease and the technological gap

  • Cherif, Reda

I present a theory explaining why less technologically advanced countries could be more vulnerable to the Dutch disease. In a bilateral trade model with monopolistic competition and increasing returns to scale, the extent of the crowding-out in the tradable sector depends positively on an interaction between the amount of revenues from natural resources’ exports and the productivity gap vis-à-vis the trade partners. With learning-by-doing, the mechanism is self-reinforcing leading to a productivity divergence pattern. The predictions of the model are consistent with cross-country empirical evidence.

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Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 101 (2013)
Issue (Month): C ()
Pages: 248-255

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Handle: RePEc:eee:deveco:v:101:y:2013:i:c:p:248-255
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