Introduction

The term "Dutch Disease," first coined by The Economist in 1977, pertains to the negative economic impacts that occur when a significant increase in revenues from natural resource extraction leads to the decline of the manufacturing sector. Bjørnland, Thorsrud and Torvik (2019) contest traditional perspectives on the Dutch disease, arguing for more dynamic interpretations of its effects on the economy.

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Methodology

Dutch Disease Dynamics Reconsidered presents a data-driven approach to understanding Dutch disease, integrating dynamic stochastic general equilibrium (DSGE) models into their framework. The authors utilized the Extended Penn World Tables for the empirical data on global oil price, trade balance, and relative prices to validate the modeled theoretical setup and subsequent hypotheses (Bjørnland, H.C., Thorsrud, L.A., and Torvik, R., 2019, pp. 421-425).

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Main Themes

The Bjørnland, Thorsrud and Torvik paper classify Dutch disease into two phenomena: the spending effect and the resource movement effect. A significant theme of the paper is the proposition that Dutch disease is not necessarily detrimental, as traditionally suggested. The authors contend that the economic outcome is modulated by how effectively the profits generated from natural resource extraction are utilized within a country (Bjørnland, H.C., Thorsrud, L.A., and Torvik, R., 2019, pp. 416-418).

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Criticisms & Findings

The paper effectively challenges traditional interpretations of Dutch disease but fails to sufficiently address how governance quality and institutional strength influence these economic outcomes. Nevertheless, the study provides a novel perspective, emphasizing how the use of resource garners either positive or negative outcomes (Bjørnland, H.C., Thorsrud, L.A., and Torvik, R., 2019, pp. 429-431).

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Conclusion

Bjørnland, H.C., Thorsrud, L.A., and Torvik, R.'s paper offers a dynamic reconsideration of the Dutch disease, pushing economic discourse forward regarding the impacts of natural resource extraction on economies.

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References

Bjørnland, H.C., Thorsrud, L.A. and Torvik, R., 2019. Dutch disease dynamics reconsidered. European Economic Review, 119, pp.411-433.