Dutch disease, oil and developing countries natalie st. The economic mechanisms behind the dutch disease have also been at work in norway. Canada economy showing symptoms of dutch disease, oecd warns. In the model, there is a nontradable sector which includes services and two tradable sectors. Oecd reports on netherlands, various issues 1 according to the handbook of development economics the dutch disease is defined as. In order to gain an understanding it is necessary to outline the.
A 2008 oecd study warned that canada was at risk of dutch disease and needed to ensure vulnerable sectors like manufacturing were not crowded out as a. Dutch disease, named after a similar reorientation that oc curred in the. The latter look at the global commodity boom and make the grim diagnosis for canada of dutch disease. Jun 15, 2012 sovereign fund would take care of dutch disease.
The dutch disease refers to the case where a resource boom in an economy leads to. Dutch exports of goods and services, 196097 % of gdp source. I learned as an undergrad at boston university that dutch disease has a rather specific meaning. Dutch disease story, or at least the part that is described in these earlier articles as the spending effect. Policy brief june 2012 the canadian chamber of commerce. The oecd is weighing in on the controversy surrounding whether canada is suffering from an economic condition known as dutch disease, and its qualified answer is yes. Canada ranks 30th out of 34 oecd countries in productivity growth over the past. A diagnosis of canada s manufacturing woes, concedes that canada is suffering from a mild case of the dutch disease. A 2008 oecd study warned that canada was at risk of dutch disease and needed to ensure vulnerable sectors like manufacturing were not crowded out as a result of the rise of commodity exports. The main symptom of the dutch disease is therefore a contraction of the manufacturing output and employment. The supply of medical isotopes nuclear energy agency.
This phenomenon, referred to as the dutch disease, poses a particular policy. University of ottawa, canada january 2009 abstract we argue that the failure to disentangle the evolution of the canadian currency and energy and commodity prices from the us currency leads to potential wrong conclusions regarding the case of a dutch disease in canada. Wage costs have increased considerably relative to trading partners, partly due to higher nominal wage growth and partly due to an appreciation of the norwegian krone. The dutch disease effect showing the cumulative impact over 4 years of kalman and hp filtered permanent oil price shocks. Expenditure by disease, age and gender under the system of health accounts sha framework.
Does the canadian economy suffer from dutch disease. A fixed effects panel regression was run for 31 oecd countries over the period 19952014. Thomas mulcair, pounced on a recent oecd report to tell citizens that canada has dutch disease. The report, titled dutch disease or failure to compete. The classic economic model describing dutch disease was developed by the economists w. The rise of the nontradable sector is lower if the labour supply tends. A model of dutch disease when studying dutch disease, researchers typically model the economy as consisting of three sectors.
Oecd ilibrary is the online library of the organisation for economic cooperation and development oecd featuring its books, papers and statistics and is the gateway to oecd s analysis and data. A diagnosis regarding whether a country is experiencing the dutch disease as a result of large oda inflows carries important policy implications and, hence, should be based on a careful. To answer it, one would have to involve the concept of significant reductions in norwegian manufacturing sectors in excess of the normal displacement all industrialized countries experience. Oecd ilibrary russian manufacturing and the threat of. Many african countries have also struggled to enable rising living standards after the discovery of oil. This paper examines the theory of dutch disease and its implications for practical policy questions. Building on prior work concerning wage coordination institutions kenworthy 1996 and inequality pontusson 2005, i examine how both affect the severity of the dutch disease. The canadian dollar, oil and canadas dutch disease. See more ideas about dutch disease, canada economy and jason kenney. The canadian dollar, oil and canadas dutch disease the. The median growth rate of value added for industries is 1. In table 1, we present means, medians, and standard deviations for the key variables in the analysis. It highlights how countries differ in terms of the health status and healthseeking behaviour of their citizens. The dutch disease and capital market openness to fdi by country.
Misconceptions about dutch disease g cornelis van kooten department of economics, university of victoria may 25, 2012 both the leader of the green party of canada, ms. Unlike in the earlier 1 the figures quoted here mostly report changes between the fiscal years 200506 and 201011. The dutch disease theory ddt explains the dynamics of this dilemma for advanced countries such as the netherlands natural gas and the united kingdom oil and gas 4, 6. This paper examines the theory of dutch disease and its implications for practical.
A diagnosis of canadas manufacturing woes, concedes that canada is suffering from a mild case of the dutch disease. A cure for dutch disease canadian centre for policy. Russian manufacturing and the threat of dutch disease a comparison of competitiveness developments in russian and ukrainian industry this paper examines the development of russian industry in comparison with that of ukrainian industry during 19952004 in an effort to ascertain to what extent, if any, russian manufacturing showed signs of. Oecd ilibrary is the online library of the organisation for economic cooperation and development oecd featuring its books, papers and statistics and is the gateway to oecds analysis and data. Second, the immigration of workers into the booming provinces exerts a mitigating in.
The theory of the dutch disease predicts that income from oil and other natural resources produces negative economic consequences through two different mechan. Dutch disease is a term that is wellknown to economists and development practitioners. We suggest that these effects can be exacerbated when the provinces have prior claims to resource rents. Oecd sees signs of dutch disease in canada cbc news. For the canadian economy, the initial shock might be seen as a mix of type i and ii. For the promoters of dutch disease, this is the aha fact, with the coincidental relationship described as causal. The dutch disease in countries with open and less open capital markets proposi. Energy prices and the canadian dollar, working paper no. Stat enables users to search for and extract data from across oecds many databases. A focus on diabetes executive summary there is increasing interest in international comparisons of health system performance. A detailed analysis by westin 2004, based on data through 2003, concluded that, despite the existence of some dutch disease symptoms, russia had not contracted the fullblown disease by end2003.
Some regard canadas wealth of natural resources as a blessing. The dutch disease theory ddt explains the dynamics of this dilemma for advanced countries such as the netherlands natural gas and the united kingdom oil and gas 4. The average aid inflow into the 32 countries in the 19801990 sample is 5. The dutch disease is a resource reallocation process away from less pro. Canada is a resourcerich country, and has traditionally. The deindustrialization of a nations economy that occurs. Dutch disease and the mitigation effect of migration. Similarly, roland 2005 argued that it is premature to conclude that the russian economy is experiencing dutch disease. Incidentally, it might be argued that the true dutch disease in the netherlands was not the adverse effects on manufacturing of real.
Four different parameters of dutch disease were used as dependent variables for this analysis. In this paper, we revisit the issue of a dutch disease affecting the canadian. Indeed, the number of ct scans performed in canada is slightly above the oecd average 153 versus 143 scans per 1 000. Although there are methodological challenges in terms of having consistent and comparable data, there is much to be gained by understanding how canada compares internationally. Rajan and arvind subramanian december 2009 we examine the effects of aid on the growth of manufacturing, using a methodology that exploits the variation within countries and across manufacturing sectors, and corrects for. Aid, dutch disease, and manufacturing growth forthcoming in the journal of development economics raghuram g. They have an incentive to use the rents for provincial development and diversification at the expense of other provinces, and instead of. Escaping the natural resource curse and the dutch disease. Workers operate a rig at a cenovus oil well near fort mcmurray, alta. The phenomenon was first observed in the case of the netherlands in the 1960s hence the name dutch disease following an important discovery of oil and gas in the north sea. They theorized, rather than observing since the early research ignored. The rise of the nontradable sector is lower if the labour supply.
Canada economy showing symptoms of dutch disease, oecd. While much resource literature focusing 1 dutch disease may be defined in many ways. Population, million persons, 19982018 population, annual growth rate %, 2018. Through the analysis of several countries experiences in finding and exporting oil this paper seeks an answer to the question of if there is an optimal way to avoid the havoc dutch disease can cause. Jun 24, 2015 this paper examines the theory of dutch disease and its implications for practical policy questions. The term dutch disease was first coined by the economist in 1977 to describe the poor performance of the dutch economy after a major natural gas discovery. And according to their calculations in the report titled canadas dutch disease, crude will account for 27 per cent of all canadian goods. Sep 10, 2014 and according to their calculations in the report titled canada s dutch disease, crude will account for 27 per cent of all canadian goods exports by 2025, as the biggest single component. Dutch disease introduction some regard canadas wealth of natural resources as a blessing. Canada economy showing symptoms of dutch disease, oecd warns the organization for economic cooperation and development says resource development primarily in western canada is causing an. For example, there is a heated debate in canada about the potential impact of oil sand production on manufacturing. Wage bargaining, inequality, and the dutch disease.
Oecd is weighing in on the controversy surrounding whether canada is suffering from an economic condition known as dutch disease, and its qualified answer is yes. Jan 14, 2018 the term dutch disease was first coined by the economist in 1977 to describe the decline in netherlands manufacturing after the discovery of gas fields in the early 1960s. The booming sector is usually the extraction of natural resources such as oil. The term dutch disease was first coined by the economist in 1977 to describe the decline in netherlands manufacturing after the discovery of gas fields in the early 1960s. Do income equality and wage bargaining centralization. The uk process of deindustrialisation was sped up by the. Is canada suffering from dutch dd surrey board of trade. The oecd is weighing in on the controversy surrounding whether canada is suffering from an economic condition known as dutch disease, and its qualified answer is. The phenomenon where large resource discoveries actually harm economies in the longterm is easy to catch, especially in countries that possess an overvalued exchange rate, high inequality, and. The spectacular rise in the price of non energy commodities and oil around 2000 is obviously an important shock that might create a dutch disease phenomenon in canada.
The dutch disease operates through two distinct transmission channels. Although dutch disease is generally associated with a natural resource discovery, it can occur from any development. Elizabeth may, and the newly elected leader of the ndp, mr. It is a shift in the economy away from the tradable goods sector i.