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The "Dutch Disease": Theory and Evidence

Ignacio Hernandez's picture

The term “Dutch Disease” originated in the Netherlands during the 1960s, when the high revenue generated by its natural gas discovery led to a sharp decline in the competitiveness of its other, non-booming tradable sector. Despite the revenue windfall the new discovery brought, the Netherlands experienced a drastic decline in economic growth. This economic paradox has since been recognized as the situation in which a booming sector adversely affects the performance of other sectors of an economy, and in particular, the non-booming tradable sector. In the past two decades, a sizable literature on the Dutch Disease has examined the commodity booms experienced by some countries. The petroleum boom from 1973 to 1979 produced the most generally significant consequences.

 

Read the whole paper by Poverty and Growth Blog regular, Migara de Silva.

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