Author:
Gylfason Thorvaldur,Herbertsson Tryggvi Thor,Zoega Gylfi
Abstract
This paper diagnoses the symptoms of the Dutch disease in a two-sector
stochastic endogenous growth model. A productive, low-skill-intensive
primary sector causes the currency to appreciate in real terms, thus
hampering the development of a high-skill-intensive secondary sector and
thereby reducing growth. Moreover, the volatility of the primary sector
generates real-exchange-rate uncertainty and may thus reduce investment and
learning in the secondary sector and hence also growth. Cross-sectional and
panel regressions based on data for 125 countries in the period 1960–1992
confirm a statistically significant inverse relationship between the size of
the primary sector and economic growth, but not between the volatility of
the real exchange rate and growth.
Publisher
Cambridge University Press (CUP)
Subject
Economics and Econometrics
Cited by
350 articles.
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