Abstract:
A natural resource based export boom can increase overall national wealth and
improve a country's balance of payments position, but leave some sectors in a
protracted and costly adjustment process. This phenomenon is known as "Dutch
disease", a term associated with the difficulties experienced by the Dutch
manufacturing sector after the natural gas boom, hike in world energy prices
and expansion of the gas-revenue financed government sector expansion in the
Netherlands. This paper reviews the theoretical predictions of a country
experiencing a resource boom. It then briefly describes the country experiences
of the Netherlands, Norway and the United Kingdom in this regard and finally
develops a methodology for a more formal statistical analysis designed to shed
light on the relationships between the energy sector and manufacturers in these
countries, as well as to identify other potential explanatory factors.