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Escaping the Resource Curse and the Dutch Disease? When and Why Norway Caught up with and Forged ahead of Its Neighbors

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In the 1960s, Norway lagged behind its Scandinavian neighbors in the aggregate value of economic production per capita, as it had for decades. By the 1990s, Norway had caught up with and forged ahead of Denmark and Sweden. When and why did Norway catch up? The discovery and extraction of oil in the early 70s is usually suggested as the explanation. But oil alone cannot explain Norway's growth since Sachs and Warner (2001) show that resource-gifts often reverse growth, making oil a curse not a blessing. Moreover, there is the possibility of contracting the Dutch Disease, which involves a rapid and substantial contraction of the traded goods sector. This article explains how deliberate macroeconomic policy, the arrangement of political and economic institutions, a strong judicial system, and social norms contributed to let Norway escape the Resource Curse and the Dutch Disease for more than two decades. Intriguingly, it appears that Norway in the late 90s may show some symptoms. Norway experiences reversed relative growth compared to Denmark and Sweden and a contraction of industrial activity. This article explores the political economy behind this recent slow-down.

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  • Erling Røed Larsen, 2004. "Escaping the Resource Curse and the Dutch Disease? When and Why Norway Caught up with and Forged ahead of Its Neighbors," Discussion Papers 377, Statistics Norway, Research Department.
  • Handle: RePEc:ssb:dispap:377
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    Cited by:

    1. Marek Szturo & Bogdan Włodarczyk & Alberto Burchi & Ireneusz Miciuła & Karolina Szturo, 2021. "Improving Relations between a State and a Business Enterprise in the Context of Counteracting Adverse Effects of the Resource Curse," Sustainability, MDPI, Open Access Journal, vol. 13(3), pages 1-14, January.
    2. Luis Felipe Céspedes C. & David Rappoport W, 2006. "El Fondo Gubernamental de Petróleo de Noruega," Notas de Investigación Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 9(1), pages 71-78, April.
    3. Cyril Obi, 2010. "Oil as the ‘curse’ of conflict in Africa: peering through the smoke and mirrors," Review of African Political Economy, Taylor & Francis Journals, vol. 37(126), pages 483-495, December.
    4. Ramírez-Cendrero, Juan M. & Wirth, Eszter, 2016. "Is the Norwegian model exportable to combat Dutch disease?," Resources Policy, Elsevier, vol. 48(C), pages 85-96.
    5. Goldemberg, José & Schaeffer, Roberto & Szklo, Alexandre & Lucchesi, Rodrigo, 2014. "Oil and natural gas prospects in South America: Can the petroleum industry pave the way for renewables in Brazil?," Energy Policy, Elsevier, vol. 64(C), pages 58-70.
    6. Frankel, Jeffrey A., 2010. "The Natural Resource Curse: A Survey," Scholarly Articles 4454156, Harvard Kennedy School of Government.
    7. Frankel, Jeffrey A., 2012. "The Natural Resource Curse: A Survey of Diagnoses and Some Prescriptions," Scholarly Articles 8694932, Harvard Kennedy School of Government.
    8. Nicolás Magud & Sebastián Sosa, 2013. "When And Why Worry About Real Exchange Rate Appreciation? The Missing Link Between Dutch Disease And Growth," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 4(02), pages 1-27.
    9. Jair N. Ojeda & Julián A. Parra-Polanía & Carmiña O. Vargas, 2014. "Natural-Resource Booms, Fiscal Rules and Welfare in a Small Open Economy," BORRADORES DE ECONOMIA 011132, BANCO DE LA REPÚBLICA.
    10. Larsen, E.Roed., 2005. "Are rich countries immune to the resource curse? Evidence from Norway's management of its oil riches," Resources Policy, Elsevier, vol. 30(2), pages 75-86, June.
    11. Boniface Ngah Epo & Dief Reagen Nochi Faha, 2019. "Natural Resources, Institutional Quality, and Economic Growth: an African Tale," Post-Print halshs-02157588, HAL.
    12. José Fuinhas & António Marques & Alcino Couto, 2015. "Oil rents and economic growth in oil producing countries: evidence from a macro panel," Economic Change and Restructuring, Springer, vol. 48(3), pages 257-279, November.
    13. Dehghan Nejad, Omid, 2011. "The review of financial repression policies and banking system in Iran," MPRA Paper 30924, University Library of Munich, Germany.

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    More about this item

    Keywords

    booming sector; catch-up; comparative development; counterfactual path; Dutch Disease; economic parity; economic growth; factor movement; gross domestic product; industry; manufacturing; rent seeking; Resource Curse; oil discovery; political economy; spending effect; spillover-loss;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)

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