Dutch Disease


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Dutch Disease

The phenomenon in which the manufacturing sector of a country declines when it begins to make significant profits from the exploitation of a natural resource. For example, if a country suddenly discovers oil and sells it on the international market, it may see a decline in the competitiveness of its manufacturing companies. It is thought that the Dutch disease comes from the fact that the sale of the natural resource leads to a stronger currency, which makes the country's exports more expensive and causes scaling down in manufacturing.
References in periodicals archive ?
Brahmbhatt et al (2010) argue that countries with poor governance are more likely to mismanage resources leading to unproductive rent-seeking activity and to also mismanage macroeconomic challenges related to the volatility of primary commodity prices and structural changes such as Dutch disease.
Second, the economic concept of Dutch Disease refers to the potential negative effects natural-resource windfalls and accompanying appreciations of exchange rates can have for the rest of the economy.
Economists call this the Dutch disease whereby the huge increases in foreign exchange reserves, as experienced by Holland following its gas discoveries, causes the currency to appreciate which destroys the other traded goods sectors such as agriculture.
The analysis surveys the Dutch disease, rentier state, and rent-seeking versions of the resource curse and finds they have significant shortcomings in terms of theory and evidence.
To answer this question I have applied the Dutch Disease theory to Sierra Leone.
DUTCH DISEASE is an economic concept that tries to explain the apparent relationship between the exploitation of natural resources and a decline in the manufacturing sector combined with moral fallout.
Oomes and Kalcheva (2007: 4) suggest that Russia may be the latest example of a developed country to have suffered the Dutch disease, given the value of its rapid increase in exports of crude oil and natural gas since 2000.
The Dutch Disease, or what APS Energy Group President Pierre Shammas called "The Oil Curse" when Saddam's Iraq invaded Iran in 1980, is caught whenever a commodity brings a sudden rise in income in one sector of the economy which is not matched by increased income in the other sectors.
Nigeria, it is simply the doomsday scenario, an amalgamation of all the worst oil has to offer Africa: corruption, ethnic hatred, Dutch disease, and rentierism, organized crime, militant rebellion, hostage taking, and sabotage of industry activity, and a country held together tenuously.
3) The economic concepts underlying Dutch Disease have been more rigorously defined and explained by Corden and Neary (1982) and Corden (1984).
So in the Dutch Disease the traditional productive sectors of the economy contract, while the service sector expands.