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Appendix 1: Graphs showing boom periods and counterfactual periods for the 18 countries retained for analysis. The plotted lines show natural resource exports as a share of GDP, both USD, one is raw data the other smoothed. The area to the right of the vertical line is the period used in the analysis, with the shaded area the boom period and the rest the counterfactual period.
Appendix2: Further detail on total and non-resource GDP per person, before and after the boom years.
I thank Andrew Berg, Catherine Pattillo, Sergio Rodriquez, Martin Sommer, Maxim Kryshko and participants in the IMF research seminar for helpful comments. Financial support from DFID is also gratefully acknowledged.
Non-resource GDP has been examined in previous studies, but not for the specific questions in this paper. Gelb and associates (1988) examine non-mining GDP growth during the late 1970’s-early-1980’s boom period. Arezki, Hamilton and Kazimov (2011) use growth in non-resource GDP as the dependent variable in their study on the impact of government spending.
Other possible mechanisms for the curse, such as the diversion of productive entrepre-neurship into rent-seeking activities would affect growth in a similar manner to the dutch disease mechanism discussed here, by reducing accumulation of a kind of capital that enters the production function. The results in the paper do not hinge on the particular curse mechanism chosen for the model
A full discussion of options to mitigate or counteract Dutch Disease would include offshore investment or spending (to lessen demand pressure on domestic non-tradeables), low taxes as in the GCC States (Gelb), low barriers to the use of foreign-born labor and and input subsidies.
The slope equals the product of two terms:
As a sidenote, some readers may be surprised that Iran and Egypt are not in the sample but in fact these countries did not experience large booms in the 2000’s despite having done so in the 1970’s.
The six countries are Bolivia, Libya, Oman, Saudi Arabia, Trinidad and Tobago, and the United Arab Emirates.
To determine whether a shift in the labor force towards low-productivity construction workers had a big influence on this result, labor productivity growth 2006-12 was also calculated with the labor share of construction held at the 2006 value. This showed only slightly higher growth of 1.37 rather than 1.22.