Optimal Dutch Disease

Growth models of the Dutch disease, such as those of Krugman (1987), Matsuyama (1992), Sachs and Warner (1995) and Gylfason et al. (1999), explain why resource abundance may reduce growth. The literature, however, also raises a new question: if the use of resource wealth hurts productivity growth, how should such wealth be optimally managed? This question forms the topic of the present paper, in which we extend the growth literature on the Dutch disease from a positive to a normative setting. We show that the assumptions in the previous literature imply that the optimal share of national wealt... Mehr ...