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The Resource Curse Hypothesis in Lao Economy

Author

Listed:
  • Soukvisan Khinsamone

Abstract

The purpose of this paper is to investigate the adaptability of the resource curse hypothesis for Lao economy. The study verifies the two crowding-out logics that resource abundance would crowd out manufacturing activities and/or savings and investment, by examining their causalities and impulse responses in a vector auto-regression (VAR) model estimation. The estimation outcomes implied the existence of the resource curse in Lao economy: resource production has crowded out manufacturing activities through real exchange rate appreciation, thereby causing the Dutch Disease; and resource production has not contributed significantly to capital accumulation, thereby being not consistent with Hartwick-rule. The study contributed to the literature by verifying two kinds of crowding-out logics on the resource curse by applying a VAR model: the crowding-out of manufacturing activities as a sectoral allocation, and the crowding-out of savings and investment as an intertemporal allocation. The study might also be valuable to the policy makers, since it proposed a strategy for transforming Lao economic structure from "resource curse" to "resource blessing" by setting up some institutional framework to allocate resource revenues to infrastructure development.

Suggested Citation

  • Soukvisan Khinsamone, 2017. "The Resource Curse Hypothesis in Lao Economy," Journal of Asian Development, Macrothink Institute, vol. 3(2), pages 60-77, November.
    • Handle: RePEc:mth:jad888:v:3:y:2017:i:2:p:60-77
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    References listed on IDEAS

    as
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    2. Kyophilavong, Phouphet & Senesouphap, Chanthachonh & Yawdhacksa, Somnack, "undated". "Resource Boom, Growth and Poverty in Laos: what can we learn from other countries and policy simulations?," PEP Policy Briefs 161661, Partnership for Economic Policy (PEP).
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