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Title: De-Specialization, Dutch Disease and Sectoral Productivity Di fferences
Citation Type: Working Paper
Publication Year: 2010
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Abstract: We use macro corss0coutnry data and micro US county level data to demonstrate that resource rich regions have significantly higher labor productivity in manufacturing than resource poor regions, but only slightly lower labor productivity in non-manufacturing. The mechanism suggested by this paper to explain these facts is the process of de-specialization. In a standard Dutch disease story, endowments of natural resources induce labor to move from the (traded) manufacturing sector to the (non-traded) non-manufacturing sector. We argue that in resource rich economies, many of those working in the non-manufacturing sector, are those whose comparative advantage is not in non-manufacturing sector work, whilst those left working in the manufacturing sector are the most suited to manufacturing work. Since manufacturing employs relatively less workers, the impact of shifting labor will be more pronounced within that sector. We construct a two sector, general equilibrium, open economy Roy (1951) model of selection - in the spirit of Lagakos and Waugh (2009). A calibrated version of the model predicts significantly higher output per worker in manufacturing between resource rich and resource poor countries, and somewhat lower output per worker in non-manufacturing - even though countries and sectors have the same aggregate efficiency terms.
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Authors: Kuralbayeva, Karlygash; Stefanski, Radoslaw
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Institution: University of Oxford
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Data Collections: IPUMS USA
Topics: Labor Force and Occupational Structure, Migration and Immigration
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