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The Natural Resource Curse: An Analysis of the Dutch Case based on Sectoral Economies of Scale

  • Maria-Dolores, Ramon
  • José Rodolfo, Morales

    (Departamentos y Servicios::Departamentos de la UMU::Fundamentos del Análisis Económico)

This paper analyzes the curse of natural resources from a new approach, taking as reference object the economy of the Netherlands. It is shown how the deindustrialization process of an economy suffers as a result of the natural resource sector development, and how it may cause lower growth rates when the industrial sector has certain features. As a starting point, we proceed with an estimation of production functions for different sectors of the economy in order to quantify the economies of scale in each of them. Subsequently, by means of a constrained optimization model, a boom in the natural resource sector is simulated and the results obtained under different scenarios are discussed by comparing them with a base scenario. The results obtained suggest that the curse of natural resources can occur if the expansion of the natural resource sector is high, in this case being the lower economic growth rate. This curse could be mitigated by expanding the areas of high productivity in non-tradable goods. It is also noted that the higher the labour market rigidity the result it will be a lower economic growth rate, and a combination of these rigidities with a pronounced expansion in the resource sector could lead to further reductions in economic growth rates.

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File URL: http://digitum.um.es/xmlui/bitstream/10201/26673/1/WPUMUFAE.2012.02.pdf
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Paper provided by DIGITUM. Universidad de Murcia in its series UMUFAE Economics Working Papers with number 26673.

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Length: 45
Date of creation: Feb 2012
Date of revision:
Handle: RePEc:mur:wpaper:26673
Contact details of provider: Web page: http://www.um.es/fee/

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  1. 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.
  2. Paul Collier & Benedikt Goderis, 2007. "Commodity Prices, Growth, and the Natural Resource Curse: Reconciling a Conundrum," CSAE Working Paper Series 2007-15, Centre for the Study of African Economies, University of Oxford.
  3. Paul Collier & Benedikt Goderis, 2007. "Commodity Prices, Growth, and the Natural Resource Curse: Reconciling a Conundrum," Economics Series Working Papers WPS/2007-15, University of Oxford, Department of Economics.
  4. Sachs, Jeffrey D. & Warner, Andrew M., 2001. "The curse of natural resources," European Economic Review, Elsevier, vol. 45(4-6), pages 827-838, May.
  5. Mehlum, Halvor & Moene, Karl-Ove & Torvik, Ragnar, 2003. "Institutions and the resource curse," Memorandum 29/2002, Oslo University, Department of Economics.
  6. Claudio Bravo-Ortega & Jose De Gregorio, . "The Relative Richness of the Poor? Natural Resources, Human Capital and Economic Growth," Working Papers Central Bank of Chile 139, Central Bank of Chile.
  7. Gylfason, Thorvaldur, 2001. "Natural resources, education, and economic development," European Economic Review, Elsevier, vol. 45(4-6), pages 847-859, May.
  8. Jean-Philippe C. Stijns, 2001. "Natural Resource Abundance and Human Capital Accumulation," Development and Comp Systems 0112001, EconWPA.
  9. Jean-Philippe Stijns, 2003. "An Empirical Test of the Dutch Disease Hypothesis using a Gravity Model of Trade," International Trade 0305001, EconWPA.
  10. Francesco Guidi, 2010. "The Economic Effects of Oil Prices Shocks on the UK Manufacturing and Services Sectors," The IUP Journal of Applied Economics, IUP Publications, vol. 0(4), pages 5-34, October.
  11. Romer, Paul, 1993. "Idea gaps and object gaps in economic development," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 543-573, December.
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