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Inflation, Employment, and the Dutch Disease in Oil-Exporting Countries: A Short-Run Disequilibrium Analysis

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  • Sweder van Wijnbergen

Abstract

We explain nontraded goods and labor shortages in the Gulf countries, the decline of the traded goods sector in oil producers ("Dutch Disease"), and the absence of employment benefits of higher oil revenues in Latin American oil producers using a disequilibrium model where real wages and the real exchange rate adjust slowly to clear the labor and nontraded goods market. Higher oil revenues can be likened to a transfer putting pressure on NT goods prices and drawing resources out of the T sector. The slope of the wage indexation line determines whether classical unemployment or repressed inflation results. Various policy measures are analyzed.

Suggested Citation

  • Sweder van Wijnbergen, 1984. "Inflation, Employment, and the Dutch Disease in Oil-Exporting Countries: A Short-Run Disequilibrium Analysis," The Quarterly Journal of Economics, Oxford University Press, vol. 99(2), pages 233-250.
  • Handle: RePEc:oup:qjecon:v:99:y:1984:i:2:p:233-250.
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    Cited by:

    1. Joseph, K.J., 2002. "Growth of ICT and ICT for Development: Realities of the Myths of the Indian Experience," WIDER Working Paper Series 078, World Institute for Development Economic Research (UNU-WIDER).
    2. Farzanegan, Mohammad Reza & Markwardt, Gunther, 2009. "The effects of oil price shocks on the Iranian economy," Energy Economics, Elsevier, vol. 31(1), pages 134-151, January.
    3. Charles, Michael B. & Ryan, Rachel & Oloruntoba, Richard & Heidt, Tania von der & Ryan, Neal, 2009. "The EU-Africa Energy Partnership: Towards a mutually beneficial renewable transport energy alliance?," Energy Policy, Elsevier, vol. 37(12), pages 5546-5556, December.
    4. Farzanegan, Mohammad Reza & Thum, Marcel, 2017. "More oil, less quality of education? New empirical evidence," CEPIE Working Papers 09/17, Technische Universität Dresden, Center of Public and International Economics (CEPIE).
    5. Mohammad Ali MORADI, "undated". "Oil Resource Abundance, Economic Growth,and Income Distribution in Iran," EcoMod2009 21500069, EcoMod.
    6. Hossein Kavand & J. Stephen Ferris, 2012. "An Oil-Driven Endogenous Growth Model," Carleton Economic Papers 12-03, Carleton University, Department of Economics.
    7. Loïc Batté & Agnès Bénassy-Quéré & Benjamin Carton & Gilles Dufrénot, 2009. "Term of Trade Shocks in a Monetary Union: an Application to West-Africa," Working Papers 2009-07, CEPII research center.
    8. Howard Michael, 2002. "Causality Between Exports, Imports and Income In Trinidad and Tobago," International Economic Journal, Taylor & Francis Journals, vol. 16(4), pages 97-106.
    9. World Bank, 2007. "Nigeria - Competitiveness and Growth : Country Economic Memorandum, Volume 2. Main Report," World Bank Other Operational Studies 7824, The World Bank.
    10. Samuel Wills, 2012. "Optimal Monetary Responses to Oil Discoveries," Discussion Papers 1408, Centre for Macroeconomics (CFM), revised Apr 2014.
    11. repec:ipn:libros:017 is not listed on IDEAS
    12. Osman M. Osman & Essam E.H. Montasser, 2003. "GCC and The Arab Economy: Growth, Reform and Regionalization," Working Papers 0329, Economic Research Forum, revised 10 Feb 2003.
    13. Giovanni Covi, 2014. "Dutch disease and sustainability of the Russian political economy," ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT, FrancoAngeli Editore, vol. 2014(2), pages 75-110.
    14. Everhart, Stephen & Duval-Hernandez, Robert, 2001. "Management of oil windfalls in Mexico : historical experience and policy options for the future," Policy Research Working Paper Series 2592, The World Bank.
    15. Kirk Hamilton & John Hartwick, 2008. "Oil Stock Discovery and Dutch Disease," Working Papers 1163, Queen's University, Department of Economics.
    16. repec:eee:eneeco:v:66:y:2017:i:c:p:35-42 is not listed on IDEAS
    17. Mahvash S Qureshi, 2008. "Africa’s Oil Abundance and External Competitiveness; Do Institutions Matter?," IMF Working Papers 08/172, International Monetary Fund.
    18. Mohammad Reza Farzanegan & Marcel Thum, 2017. "Oil Dependency and Quality of Education: New Empirical Evidence," MAGKS Papers on Economics 201745, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    19. Hans-Werner Sinn & Frank Westermann, 2000. "Two Mezzogiornos," CESifo Working Paper Series 378, CESifo Group Munich.
    20. Bodenstein, Martin & Erceg, Christopher J. & Guerrieri, Luca, 2011. "Oil shocks and external adjustment," Journal of International Economics, Elsevier, vol. 83(2), pages 168-184, March.
    21. Torvik, Ragnar, 2001. "Learning by doing and the Dutch disease," European Economic Review, Elsevier, vol. 45(2), pages 285-306, February.
    22. Bjorvatn, Kjetil & Farzanegan, Mohammad Reza & Schneider, Friedrich, 2012. "Resource Curse and Power Balance: Evidence from Oil-Rich Countries," World Development, Elsevier, vol. 40(7), pages 1308-1316.
    23. Roe, Alan R., 2011. "Aid and the Fiscal and Monetary Responses to Dutch Disease," WIDER Working Paper Series 095, World Institute for Development Economic Research (UNU-WIDER).

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