Economic costs of the Dutch disease: empirical estimates from the Netherlands

The discovery of natural gas in the Netherlands in 1959 has long been considered one of the main reasons for the poor performance of the Dutch economy in the 1970s and the 1980s. The term "Dutch disease" has since its invention in 1977 been used to describe this e ect. The Dutch disease has been thoroughly developed as a theoretical concept, but little empirical work has been done to prove its adverse costs to society. I employ the synthetic control method to study the possible negative e ects the Dutch disease has had on GDP per capita and productivity in the Netherlands. I nd no evidence of any negative e ect in the 1970s, and while there seems to be a negative e ect in the 1980s, it is not large enough to be signi cant and may just as well be caused by the 1979 oil crisis and the following recession. This thesis challenges the prevalent notion of the harmful Dutch disease, and while the conclusions are somewhat uncertain I maintain that the fear of the Dutch disease may be exaggerated. 2nhhma