Year: 2015
Type: dissertation
Abstract: Over the last decades, the relationship between natural resource discoveries on macroeconomic\ndevelopment has been thoroughly debated. The importance of maintaining a sustainable\ndevelopment in mainland industries has made this a topic of interest for both economists and\nregulators. This master thesis aims to examine and quantitatively assess how the Norwegian\neconomy has been affected by the evolution of its petroleum sector. We also relate our findings to\nearlier contributions on this topic from both theoretical and empirical literature.\nWe examine the effect of the petroleum industry on the Norwegian economy by conducting two\ncomparative analyses. First, following a theoretical two-sector model, we compare the impact of\nbooms and busts in oil prices on macroeconomic variables in two resource economies, Norway\nand Australia, and a non-resource economy, Sweden. Generally, we find that the predicted\ndynamics can be identified in the resource economies, but that these responses have changed\nthrough time. Notably, the introduction of a floating exchange rate has allowed the real effective\nexchange rate to respond to oil price fluctuations, thus shielding the remaining economy. Other\ninstitutional effects, such as the Norwegian fiscal rule, sovereign wealth fund and a well-defined\nmonetary framework might also have contributed to this effect.\nSecond, we build a counterfactual scenario in which Norway did not discover petroleum. This is\ndone by means of a synthetic control method, creating a synthetic Norway from 1972, using nonpetroleum\nproducing OECD countries. We find that Norwegian GDP per capita has been an\naverage of 15.6 % larger than what it would have been in the absence of petroleum resources.\nNorwegian mainland industries have suffered an average loss in production of 12.4 % of\nmainland GDP relative to the counterfactual scenario. We hypothesize that the latter is owed to\nforfeited capital investment and real effective exchange rate effects. Furthermore, we find a\npetroleum-driven supercycle in the Norwegian GDP per capita, peaking already in 1998,\nsuggesting that the contraction-phase is more mature than previously assumed. Although political\npriorities in favour of the petroleum industry have been beneficial, the generated revenue streams\nand returns on investment have crowded out parts of the mainland industries. This has\nimplications for adjustments in the coming years, when the petroleum industry is phased out. We\ndiscuss briefly some scenarios for this adjustment process, and conclude.
Source: BIBSYS Brage (BIBSYS (Norway))
Authors: Kristine A. Devold, Runar Wiksnes
Language: English
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2486290940