Dutch disease in the South Pacific: evidence from the 1980s and beyond

Abstract

Dutch Disease has been put forward, most notably by proponents of the MIRAB hypothesis, as an explanation for the shift of some South Pacific microstates away from productive activities towards rent-seeking and emigration. This paper reviews the mechanisms through which Dutch Disease is thought to operate, examines likely sources of this phenomenon, and assesses the evidence from Pacific island countries. Based on selected economic indicators, the Dutch Disease appears to have been a significant factor underlying structural change in some countries at least. The feasibility and desirability of policies designed to combat this transformation are considered.