Immigration and the Dutch disease A counterfactual analysis of the Norwegian resource boom 2004-2013

Abstract

We study how labour migration modified the Dutch disease effects during the Norwegian resource boom 2004–2013. In these years the resource movement effect of the petroleum industry was larger than the spending effect. This was mainly due to the introduction of a fiscal policy rule in 2001 that limited spending. The EU-enlargement in 2004 increased labour migration and affected also the Norwegian labour market. We find that economic growth in Norway was roughly doubled from 2004 to 2013 because of the resource boom while total population increased by 2% because of higher immigration. Moreover, both the resource movement and spending effects on Mainland GDP were roughly unaffected by immigration while employment increased, real wages fell and so did productivity. The negative effects of the boom on industries producing tradables were counteracted by endogenous terms of trade effects, immigration and demand effects of the boom.