Labor Mobility, Household Production and the Dutch Disease

Citation:

Frederiksen, Elisabeth. 2007. “Labor Mobility, Household Production and the Dutch Disease.” Working Paper, University of Copenhagen Economic Policy Research Unit, Copenhagen.

Author: Elisabeth Frederiksen

Abstract:

This paper studies a model of Dutch disease with learning by doing and household production. Only women work in the households. We compare economies with mobile labor and economies with gender specific sectors. In the latter economy, in addition to working in the household, women work in either the traded or the non-traded sector, and men allocate all their labor to the sector not occupied by women. The effect of enhanced natural resource abundance on factor allocation, the real exchange rate, wage rates, production, and growth are worked out for each case. Our analysis suggests that labor mobility and differences in how gender is grouped across sectors play a role in how natural resource abundance impacts economic performance.

Keywords: Dutch Disease, endogenous growth, household production, segmented labor markets, gender wage differentials

Annotation:

• Men in Trade Economy Model
  • “Increase in resource intensity (i) has no impact on female labor supply; (ii) leads to appreciation of the real exchange rate; (iii) increases women’s wage rate relative to men’s wage rate; (iv) increases the man-made output and the GDP level; (v) has no impact on productivity growth” (18-19)
• Women in Trade Economy Model
  • “Increase in resource intensity (i) decreases female labor supply; (ii) leads to appreciation of the real exchange rate; (iii) increases the men’s and women’s wage rate, but the female to male wage ratio decreases; (iv) increases man-made output and the GDP level; (v) causes productivity growth to decline.” (20)
• Mobile Labor Economy Model
  • “Increase in resource intensity (i.a) increases the share of the labor force employed in the non-traded sector, but decreases female labor supply; (i.b) increases employment in the non-traded sector; (ii) has an ambiguous effect on the real exchange rate; (iii) increases the wage rate; has an ambiguous effect on the man-made output and the GDP level; and; (v) causes productivity growth to decline in the traded sector, but the effect on productivity growth in the non-traded sector is ambiguous.” (21-2)
• ​Women comprise 40% of resource employment in Canada and New Zealand because they can work in retail and services; When women have employment possibilities in the traded sector, abundant natural resources “tie women to the home” (26)

Quotes:

“Torvik (2001) proposes a Dutch disease model in which variation in sectoral learning by doing effects and spillover rates explains variation in how natural resources impact sectoral productivity. In this model, natural resources have no impact upon the long-term growth rate.” (1)

“Slower economic growth rates in natural resource rich economies are explained by a movement of female labor into the household sector which does not contribute to overall economic growth… Whether women decrease their labor supply in response to increased natural resource intensity, in turn, depends on the gender-grouping of the labor market.” (2)

“Occupational segregation by sex is extensive in every region, at all economic development levels, under all political systems, and in diverse religious, social and cultural environments. It is one of the most important and enduring aspects of labour markets around the world’ (Anker 1997, 315).” (3) 

"Women in the Middle East predominantly work export sectors based on manufacturing; thus the Middle East economies resemble the WiT economy, or a modified ML economy in which men can work in all sectors, but women can only work in trade.” (24)

Topics: Economies, Extractive Industries, Gender, Gender Roles, Gendered Power Relations, Households, Livelihoods

Year: 2007