DP9318 The implications of natural resource exports for non-resource trade

Author(s): Torfinn Harding, Anthony Venables
Publication Date: January 2013
Keyword(s): Dutch disease, exports, imports, natural resources, resource curse, trade
JEL(s): E21, E62, F43, H63, O11, Q33
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=9318

Foreign exchange windfalls such as those from natural resource revenues change non-resource exports, imports, and the capital account. We study the balance between these responses and, using data on 41 resource exporters for 1970-2006, show that the response to a dollar of resource revenue is, approximately, to decrease non-resource exports by 75 cents and increase imports by 25 cents, implying a negligible effect on foreign saving. The negative per dollar impact on exports is larger for countries which have good institutions and higher income levels. These countries have a higher share of manufacturing in their non-resource exports, and we show that manufactures are more susceptible than other products to being crowded out by resource exports.