Services, Inequality, and the Dutch Disease

This paper shows how Dutch disease effects may arise solely from a shift in demand following a natural resource discovery. The natural resource wealth increases the demand for non-tradable luxury services due to non-homothetic preferences. Labor th...

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Main Authors:	Battaile, Bill, Chisik, Richard, Onder, Harun
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank Group, Washington, DC 2014
Subjects:	AGGREGATE CONSUMPTION AGGREGATE DEMAND AGGREGATE DEMANDS AGRICULTURE AUTOMOBILES BENCHMARKING BILL COMMODITY COMMODITY PRICE COMMODITY PRICE BOOM COMPARATIVE ADVANTAGE CONSOLIDATION CONSTANT RETURNS TO SCALE CONSUMERS CURRENCY CURRENCY APPRECIATION DEBT DEVELOPING COUNTRIES DEVELOPMENT ECONOMICS DEVELOPMENT POLICY DIRECT PAYMENTS DISTORTIONS DISTRIBUTION OF INCOME DOMESTIC CONSUMPTION DUTCH DISEASE E-MAIL ECONOMIC ENVIRONMENT ECONOMIC GROWTH ECONOMIC MODELS ECONOMIC OUTCOMES ECONOMIC POLICY ECONOMIC THEORY ECONOMICS LITERATURE ECONOMIES OF SCALE ELASTICITY EMERGING MARKETS EMERGING MARKETS FINANCE EQUATIONS EQUILIBRIUM EQUILIBRIUM CONDITIONS EXCESS DEMAND EXCHANGE RATE EXCHANGE-RATE EXPORT REVENUE EXPORT REVENUES EXPORTERS EXPORTS FACTORS OF PRODUCTION FINANCIAL DEVELOPMENT FOREIGN EXCHANGE FREE TRADE FUTURE RESEARCH GDP GOLD HOME COUNTRY IMPORTS INCOME INCOME EFFECT INCOME ELASTICITY INCOME INEQUALITY INCOME LEVELS INSPECTION INTERNATIONAL ECONOMICS INTERNATIONAL TRADE LABOR DEMAND LABOR FORCE LABOR MARKET LABOR PRODUCTIVITY LABOR SUPPLY LOW-INCOME COUNTRIES MANUFACTURING MARGINAL PROPENSITY TO CONSUME MARKET CONDITIONS MARKET EQUILIBRIUM MATHEMATICAL PROPERTIES MIDDLE INCOME COUNTRIES NATURAL RESOURCE NATURAL RESOURCES OIL EXPORTS OIL MARKET OIL REVENUES OPEN ACCESS OPEN ECONOMY OUTPUT PHONE POLITICAL ECONOMY POLITICAL INSTITUTIONS POVERTY REDUCTION PRICE OF GOOD PRICE OF OIL PRODUCTION PROCESS PRODUCTIVITIES PRODUCTIVITY PURCHASING POWER REAL EXCHANGE RATE REMITTANCES RENTS RESOURCE MOVEMENT EFFECT RESULT RESULTS SOCIAL SERVICES STRUCTURAL CHANGE TAXATION TIME PERIOD TRADABLE GOODS USES UTILITY FUNCTION WAGES WEALTH WEB WORLD DEMAND WORLD MARKETS
Online Access:	http://documents.worldbank.org/curated/en/2014/07/19760476/services-inequality-dutch-disease http://hdl.handle.net/10986/19359

id	okr-10986-19359
recordtype	oai_dc
spelling	okr-10986-193592021-04-23T14:03:51Z Services, Inequality, and the Dutch Disease Battaile, Bill Chisik, Richard Onder, Harun AGGREGATE CONSUMPTION AGGREGATE DEMAND AGGREGATE DEMANDS AGRICULTURE AUTOMOBILES BENCHMARKING BILL COMMODITY COMMODITY PRICE COMMODITY PRICE BOOM COMPARATIVE ADVANTAGE CONSOLIDATION CONSTANT RETURNS TO SCALE CONSUMERS CURRENCY CURRENCY APPRECIATION DEBT DEVELOPING COUNTRIES DEVELOPMENT ECONOMICS DEVELOPMENT POLICY DIRECT PAYMENTS DISTORTIONS DISTRIBUTION OF INCOME DOMESTIC CONSUMPTION DUTCH DISEASE E-MAIL ECONOMIC ENVIRONMENT ECONOMIC GROWTH ECONOMIC MODELS ECONOMIC OUTCOMES ECONOMIC POLICY ECONOMIC THEORY ECONOMICS LITERATURE ECONOMIES OF SCALE ELASTICITY EMERGING MARKETS EMERGING MARKETS FINANCE EQUATIONS EQUILIBRIUM EQUILIBRIUM CONDITIONS EXCESS DEMAND EXCHANGE RATE EXCHANGE-RATE EXPORT REVENUE EXPORT REVENUES EXPORTERS EXPORTS FACTORS OF PRODUCTION FINANCIAL DEVELOPMENT FOREIGN EXCHANGE FREE TRADE FUTURE RESEARCH GDP GOLD HOME COUNTRY IMPORTS INCOME INCOME EFFECT INCOME ELASTICITY INCOME INEQUALITY INCOME LEVELS INSPECTION INTERNATIONAL ECONOMICS INTERNATIONAL TRADE LABOR DEMAND LABOR FORCE LABOR MARKET LABOR PRODUCTIVITY LABOR SUPPLY LOW-INCOME COUNTRIES MANUFACTURING MARGINAL PROPENSITY TO CONSUME MARKET CONDITIONS MARKET EQUILIBRIUM MATHEMATICAL PROPERTIES MIDDLE INCOME COUNTRIES NATURAL RESOURCE NATURAL RESOURCES OIL EXPORTS OIL MARKET OIL REVENUES OPEN ACCESS OPEN ECONOMY OUTPUT PHONE POLITICAL ECONOMY POLITICAL INSTITUTIONS POVERTY REDUCTION PRICE OF GOOD PRICE OF OIL PRODUCTION PROCESS PRODUCTIVITIES PRODUCTIVITY PURCHASING POWER REAL EXCHANGE RATE REMITTANCES RENTS RESOURCE MOVEMENT EFFECT RESULT RESULTS SOCIAL SERVICES STRUCTURAL CHANGE TAXATION TIME PERIOD TRADABLE GOODS USES UTILITY FUNCTION WAGES WEALTH WEB WORLD DEMAND WORLD MARKETS This paper shows how Dutch disease effects may arise solely from a shift in demand following a natural resource discovery. The natural resource wealth increases the demand for non-tradable luxury services due to non-homothetic preferences. Labor that could be used to develop other non-resource tradable sectors is pulled into these service sectors. As a result, manufactures and other tradable goods are more likely to be imported, and learning and productivity improvements accrue to the foreign exporters. However, once the natural resources diminish, there is less income to purchase the services and non-resource tradable goods. Thus, the temporary gain in purchasing power translates into long-term stagnation. As opposed to conventional models where income distribution has no effect on economic outcomes, an unequal distribution of the rents from resource wealth further intensifies the Dutch disease dynamics within this framework. 2014-08-15T16:05:46Z 2014-08-15T16:05:46Z 2014-07 http://documents.worldbank.org/curated/en/2014/07/19760476/services-inequality-dutch-disease http://hdl.handle.net/10986/19359 English en_US Policy Research Working Paper;No. 6966 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Group, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	AGGREGATE CONSUMPTION AGGREGATE DEMAND AGGREGATE DEMANDS AGRICULTURE AUTOMOBILES BENCHMARKING BILL COMMODITY COMMODITY PRICE COMMODITY PRICE BOOM COMPARATIVE ADVANTAGE CONSOLIDATION CONSTANT RETURNS TO SCALE CONSUMERS CURRENCY CURRENCY APPRECIATION DEBT DEVELOPING COUNTRIES DEVELOPMENT ECONOMICS DEVELOPMENT POLICY DIRECT PAYMENTS DISTORTIONS DISTRIBUTION OF INCOME DOMESTIC CONSUMPTION DUTCH DISEASE E-MAIL ECONOMIC ENVIRONMENT ECONOMIC GROWTH ECONOMIC MODELS ECONOMIC OUTCOMES ECONOMIC POLICY ECONOMIC THEORY ECONOMICS LITERATURE ECONOMIES OF SCALE ELASTICITY EMERGING MARKETS EMERGING MARKETS FINANCE EQUATIONS EQUILIBRIUM EQUILIBRIUM CONDITIONS EXCESS DEMAND EXCHANGE RATE EXCHANGE-RATE EXPORT REVENUE EXPORT REVENUES EXPORTERS EXPORTS FACTORS OF PRODUCTION FINANCIAL DEVELOPMENT FOREIGN EXCHANGE FREE TRADE FUTURE RESEARCH GDP GOLD HOME COUNTRY IMPORTS INCOME INCOME EFFECT INCOME ELASTICITY INCOME INEQUALITY INCOME LEVELS INSPECTION INTERNATIONAL ECONOMICS INTERNATIONAL TRADE LABOR DEMAND LABOR FORCE LABOR MARKET LABOR PRODUCTIVITY LABOR SUPPLY LOW-INCOME COUNTRIES MANUFACTURING MARGINAL PROPENSITY TO CONSUME MARKET CONDITIONS MARKET EQUILIBRIUM MATHEMATICAL PROPERTIES MIDDLE INCOME COUNTRIES NATURAL RESOURCE NATURAL RESOURCES OIL EXPORTS OIL MARKET OIL REVENUES OPEN ACCESS OPEN ECONOMY OUTPUT PHONE POLITICAL ECONOMY POLITICAL INSTITUTIONS POVERTY REDUCTION PRICE OF GOOD PRICE OF OIL PRODUCTION PROCESS PRODUCTIVITIES PRODUCTIVITY PURCHASING POWER REAL EXCHANGE RATE REMITTANCES RENTS RESOURCE MOVEMENT EFFECT RESULT RESULTS SOCIAL SERVICES STRUCTURAL CHANGE TAXATION TIME PERIOD TRADABLE GOODS USES UTILITY FUNCTION WAGES WEALTH WEB WORLD DEMAND WORLD MARKETS
spellingShingle	AGGREGATE CONSUMPTION AGGREGATE DEMAND AGGREGATE DEMANDS AGRICULTURE AUTOMOBILES BENCHMARKING BILL COMMODITY COMMODITY PRICE COMMODITY PRICE BOOM COMPARATIVE ADVANTAGE CONSOLIDATION CONSTANT RETURNS TO SCALE CONSUMERS CURRENCY CURRENCY APPRECIATION DEBT DEVELOPING COUNTRIES DEVELOPMENT ECONOMICS DEVELOPMENT POLICY DIRECT PAYMENTS DISTORTIONS DISTRIBUTION OF INCOME DOMESTIC CONSUMPTION DUTCH DISEASE E-MAIL ECONOMIC ENVIRONMENT ECONOMIC GROWTH ECONOMIC MODELS ECONOMIC OUTCOMES ECONOMIC POLICY ECONOMIC THEORY ECONOMICS LITERATURE ECONOMIES OF SCALE ELASTICITY EMERGING MARKETS EMERGING MARKETS FINANCE EQUATIONS EQUILIBRIUM EQUILIBRIUM CONDITIONS EXCESS DEMAND EXCHANGE RATE EXCHANGE-RATE EXPORT REVENUE EXPORT REVENUES EXPORTERS EXPORTS FACTORS OF PRODUCTION FINANCIAL DEVELOPMENT FOREIGN EXCHANGE FREE TRADE FUTURE RESEARCH GDP GOLD HOME COUNTRY IMPORTS INCOME INCOME EFFECT INCOME ELASTICITY INCOME INEQUALITY INCOME LEVELS INSPECTION INTERNATIONAL ECONOMICS INTERNATIONAL TRADE LABOR DEMAND LABOR FORCE LABOR MARKET LABOR PRODUCTIVITY LABOR SUPPLY LOW-INCOME COUNTRIES MANUFACTURING MARGINAL PROPENSITY TO CONSUME MARKET CONDITIONS MARKET EQUILIBRIUM MATHEMATICAL PROPERTIES MIDDLE INCOME COUNTRIES NATURAL RESOURCE NATURAL RESOURCES OIL EXPORTS OIL MARKET OIL REVENUES OPEN ACCESS OPEN ECONOMY OUTPUT PHONE POLITICAL ECONOMY POLITICAL INSTITUTIONS POVERTY REDUCTION PRICE OF GOOD PRICE OF OIL PRODUCTION PROCESS PRODUCTIVITIES PRODUCTIVITY PURCHASING POWER REAL EXCHANGE RATE REMITTANCES RENTS RESOURCE MOVEMENT EFFECT RESULT RESULTS SOCIAL SERVICES STRUCTURAL CHANGE TAXATION TIME PERIOD TRADABLE GOODS USES UTILITY FUNCTION WAGES WEALTH WEB WORLD DEMAND WORLD MARKETS Battaile, Bill Chisik, Richard Onder, Harun Services, Inequality, and the Dutch Disease
relation	Policy Research Working Paper;No. 6966
description	This paper shows how Dutch disease effects may arise solely from a shift in demand following a natural resource discovery. The natural resource wealth increases the demand for non-tradable luxury services due to non-homothetic preferences. Labor that could be used to develop other non-resource tradable sectors is pulled into these service sectors. As a result, manufactures and other tradable goods are more likely to be imported, and learning and productivity improvements accrue to the foreign exporters. However, once the natural resources diminish, there is less income to purchase the services and non-resource tradable goods. Thus, the temporary gain in purchasing power translates into long-term stagnation. As opposed to conventional models where income distribution has no effect on economic outcomes, an unequal distribution of the rents from resource wealth further intensifies the Dutch disease dynamics within this framework.
format	Publications & Research :: Policy Research Working Paper
author	Battaile, Bill Chisik, Richard Onder, Harun
author_facet	Battaile, Bill Chisik, Richard Onder, Harun
author_sort	Battaile, Bill
title	Services, Inequality, and the Dutch Disease
title_short	Services, Inequality, and the Dutch Disease
title_full	Services, Inequality, and the Dutch Disease
title_fullStr	Services, Inequality, and the Dutch Disease
title_full_unstemmed	Services, Inequality, and the Dutch Disease
title_sort	services, inequality, and the dutch disease
publisher	World Bank Group, Washington, DC
publishDate	2014
url	http://documents.worldbank.org/curated/en/2014/07/19760476/services-inequality-dutch-disease http://hdl.handle.net/10986/19359
_version_	1764443707581399040

Services, Inequality, and the Dutch Disease

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