Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/46271 
Year of Publication: 
2011
Series/Report no.: 
CESifo Working Paper No. 3398
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
In this paper we revisit the Dutch disease paying particular attention to the role of specific factors of production and capital stock dynamics. The main insight is that if the natural resource rich windfall is substantial but not large enough for the country to become a rentier, capital goods must be produced at home and adjustment to natural resource windfall takes time. It takes time to build this home-grown capital. Specific factors are crucial to explain the dynamic responses of the real exchange rate, capital intensities and wages in response to a natural resource windfall. If a country is small and the windfall is large, it may be able to import capital and migrant labour in which case the Dutch disease can be avoided.
Subjects: 
specific factors
real exchange rate
capital stock dynamics
factor intensity
international trade
Dutch disease
permanent income
fiscal policy rules
overlapping generations
JEL: 
E01
F43
O41
Q30
Document Type: 
Working Paper
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