Ragnar Torvik
Working Paper 1998/3. 28 p. ISSN 0801-2504. ISBN 82-7553-122-5.
This paper develops a model of Learning By Doing and the Dutch disease that extends the earlier literature in two ways. First, it is assumed that both the traded and the non-traded sector can contribute to learning. Second, it is assumed that there are learning spillovers between the sectors. It is shown that within such a model, a foreign exchange gift depreciates the real exchange rate in the long run due to a shift in the steady state relative productivity between the traded and the non-traded sector. In contrast to existing models of the Dutch disease, production and productivity in both sectors may go up or down. The conditions for the different cases are worked out.