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Resource-based Regions, the Dutch Disease and City Development

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  • TAKATSUKA Hajime
  • Dao-Zhi ZENG
  • Laixun ZHAO

Abstract

This paper examines the relationship between resource development and industrialization. When transport costs are high, regions with more valuable natural resources offer higher welfare than other regions. However, when transport costs decrease, firms begin to move out of the region, resulting in the Dutch disease, initially in terms of industry shares, but eventually in terms of welfare too when transportation is sufficiently free. If resource goods are also used as manufacturing inputs as well as final goods, they can substitute for labor when wages rise, which tends to alleviate the Dutch disease by keeping production costs down. The model thus provides helpful insight for cities trying to develop efficiently their limited resources.

Suggested Citation

  • TAKATSUKA Hajime & Dao-Zhi ZENG & Laixun ZHAO, 2013. "Resource-based Regions, the Dutch Disease and City Development," Discussion papers 13001, Research Institute of Economy, Trade and Industry (RIETI).
  • Handle: RePEc:eti:dpaper:13001
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    File URL: https://www.rieti.go.jp/jp/publications/dp/13e001.pdf
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    References listed on IDEAS

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