The Dutch disease and its neutralization: a Ricardian approach
By L. C. Bresser-Pereira. 2008
302 citations recorded by the source corpus.
The Dutch disease is a major market failure originated in the existence of cheap and abundant natural or human resources that keep overvalued the currency of a country for an undetermined period of time, thus turning non profitable the production of tradable goods using technology in the state-of-the-art. It is an obstacle to growth on the demand side, because it limits investment opportunities. The severity of the Dutch disease varies according to the extent of the Ricardian rents involved, i.e., according to the difference between two exchange rate equilibriums: the ‘current’ or market rate and the ‘industrial’ rate — the one that make viable efficient tradable industries. Its main symptoms, besides overvalued currency, are low rates of growth of the manufacturing industry, artificially high real wages, and unemployment. Its neutralization requires managing the exchange rate. The principal instrument for that is a sales or export tax on the commodities that give origin to the Dutch disease. In order to neutralize it policymakers face major political obstacles since it involves taxing exports and reducing wages. Finally, this papers argues that there is an extended concept of Dutch disease: besides having its origin in natural resources, it may arise from cheap labor provided that the ‘wage spread’ in the developing country is considerably larger than in the developed
Subfields: Building and Construction, Economics and Econometrics, Strategy and Management
View Paper: https://www.semanticscholar.org/paper/f431539106f080942184b5947644968f64e4d047
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Citations in the corpus
- Real exchange rate policies for economic development (2017, unknown): “This curse or ‘‘disease” can also be thought as the existence of a wedge between the market exchange rate equilibrium and the exchange rate(s) that would make the emergence of non-resource tradable sectors viable (Bresser-Pereira, 2008; Gerchunoff and Rapetti, 2016).”
- When and Why Worry About Real Exchange Rate Appreciation? The Missing Link Between Dutch Disease and Growth (2013, background): “Some papers emphasize inter-temporal differences of DD, like Bruno and Sachs (1982), Chatterji and Price (1988), Arellano et al.”
- The Revenge of the Market on the Rentiers: Why neo-liberal Reports of the end of history turned out to be premature (Updated 19 December 2011) (2009, background): “59 See Buiter (2009A); for analyses of the ‘Dutch Disease’, see Rowthorn and Coutts (2004), Bresser-Pereira (2008), and Palma (2008B).”