Battaile, BillChisik, RichardOnder, Harun2014-08-152014-08-152014-07https://hdl.handle.net/10986/19359This paper shows how Dutch disease effects may arise solely from a shift in demand following a natural resource discovery. The natural resource wealth increases the demand for non-tradable luxury services due to non-homothetic preferences. Labor that could be used to develop other non-resource tradable sectors is pulled into these service sectors. As a result, manufactures and other tradable goods are more likely to be imported, and learning and productivity improvements accrue to the foreign exporters. However, once the natural resources diminish, there is less income to purchase the services and non-resource tradable goods. Thus, the temporary gain in purchasing power translates into long-term stagnation. As opposed to conventional models where income distribution has no effect on economic outcomes, an unequal distribution of the rents from resource wealth further intensifies the Dutch disease dynamics within this framework.en-USCC BY 3.0 IGOAGGREGATE CONSUMPTIONAGGREGATE DEMANDAGGREGATE DEMANDSAGRICULTUREAUTOMOBILESBENCHMARKINGBILLCOMMODITYCOMMODITY PRICECOMMODITY PRICE BOOMCOMPARATIVE ADVANTAGECONSOLIDATIONCONSTANT RETURNS TO SCALECONSUMERSCURRENCYCURRENCY APPRECIATIONDEBTDEVELOPING COUNTRIESDEVELOPMENT ECONOMICSDEVELOPMENT POLICYDIRECT PAYMENTSDISTORTIONSDISTRIBUTION OF INCOMEDOMESTIC CONSUMPTIONDUTCH DISEASEE-MAILECONOMIC ENVIRONMENTECONOMIC GROWTHECONOMIC MODELSECONOMIC OUTCOMESECONOMIC POLICYECONOMIC THEORYECONOMICS LITERATUREECONOMIES OF SCALEELASTICITYEMERGING MARKETSEMERGING MARKETS FINANCEEQUATIONSEQUILIBRIUMEQUILIBRIUM CONDITIONSEXCESS DEMANDEXCHANGE RATEEXCHANGE-RATEEXPORT REVENUEEXPORT REVENUESEXPORTERSEXPORTSFACTORS OF PRODUCTIONFINANCIAL DEVELOPMENTFOREIGN EXCHANGEFREE TRADEFUTURE RESEARCHGDPGOLDHOME COUNTRYIMPORTSINCOMEINCOME EFFECTINCOME ELASTICITYINCOME INEQUALITYINCOME LEVELSINSPECTIONINTERNATIONAL ECONOMICSINTERNATIONAL TRADELABOR DEMANDLABOR FORCELABOR MARKETLABOR PRODUCTIVITYLABOR SUPPLYLOW-INCOME COUNTRIESMANUFACTURINGMARGINAL PROPENSITY TO CONSUMEMARKET CONDITIONSMARKET EQUILIBRIUMMATHEMATICAL PROPERTIESMIDDLE INCOME COUNTRIESNATURAL RESOURCENATURAL RESOURCESOIL EXPORTSOIL MARKETOIL REVENUESOPEN ACCESSOPEN ECONOMYOUTPUTPHONEPOLITICAL ECONOMYPOLITICAL INSTITUTIONSPOVERTY REDUCTIONPRICE OF GOODPRICE OF OILPRODUCTION PROCESSPRODUCTIVITIESPRODUCTIVITYPURCHASING POWERREAL EXCHANGE RATEREMITTANCESRENTSRESOURCE MOVEMENT EFFECTRESULTRESULTSSOCIAL SERVICESSTRUCTURAL CHANGETAXATIONTIME PERIODTRADABLE GOODSUSESUTILITY FUNCTIONWAGESWEALTHWEBWORLD DEMANDWORLD MARKETS10.1596/1813-9450-6966