| ID | 151277 |
| Title Proper | Wage bargaining, inequality, and the Dutch disease |
| Language | ENG |
| Author | Bunte, Jonas B |
| Summary / Abstract (Note) | The theory of the “Dutch Disease” predicts that income from oil and other natural resources produces negative economic consequences through two different mechanisms. The “Resource Movement Effect” suggests that workers leave manufacturing for higher-paying jobs in other sectors. The “Spending Effect” implies that spending resource wealth domestically leads to exchange rate appreciation. The combination of these processes results in the contraction of the export sector. This article explores how, and why, a country’s institutions may prevent the Dutch Disease before it starts. Incorporating insights from the “Varieties of Capitalism” literature, I find that the Dutch Disease is significantly less severe in countries with a high degree of wage bargaining coordination and with low income inequality. The former interrupts the Resource Movement Effect as it limits workers’ incentives to move out of the tradable sector. The latter moderates the Spending Effect because it prevents appreciation of the real exchange rate. |
| `In' analytical Note | International Studies Quarterly Vol. 60, No.4; Dec 2016: p.677-692 |
| Journal Source | International Studies Quarterly Vol: 60 No 4 |
| Key Words | Inequality ; Wage Bargaining ; Dutch Disease |