Dutch disease and the Chilean copper boom – an empirical analysis Online publication date: Sat, 11-Oct-2014
by Alex A. Ruehle, Kishore G. Kulkarni
International Journal of Education Economics and Development (IJEED), Vol. 2, No. 1, 2011
Abstract: Dutch disease is the phenomenon that has its origins in the 'immiserising growth hypothesis' which argued that increase in the export sector can lead to misery for the economy if the terms of trade deteriorate in a significant way. While Holland's economy was the first to experience such a phenomenon, few other countries such as Venezuela, Brazil, Nigeria and Malaysia have had similar experiences in last 30 years. This paper applies the logic of Dutch disease to the case of Chile and investigates if the Dutch disease was spread to Chilean level. This was partly due to the tremendous rise in copper prices, and due to extraordinary dependence of economic growth on that sector. After reviewing the contemporary literature on the subject, the paper uses econometric as well as other techniques to apply the theory to the Chilean case. Our conclusion is that the Dutch disease was in fact contracted in the Chilean economy in the time period of our investigation.
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