Resource boom and non-resource firms: Mongolia 2007 and 2011

This paper intends to show the impact that a resource boom can have on non-resource firms by testing the hypotheses pertaining to the shifts in labour productivity of non-resource heterogeneous firms in Mongolia during the resource boom of 2007 and 2011. Non-parametric methods such as Kernel distribution and Kolmogorov-Smirnov equality test are used to show that during this boom period, while low-productivity firms in the non-resource sector improved productivity, highly productive firms experienced a decline in productivity; the net effect is a downturn of aggregate productivity in the non-resource sector that is consistent with the existing macro perspective of resource curse hypothesis. The exporting sector experienced a similar result whereby high productive exporters lose productivity and therefore export competency during this resource boom. In reality, highly productive firms actually generate spillovers, so any decline in their productivity harms the nations’ growth in the long run. Future work should focus on gathering panel data sets and applying a more in-depth analysis of resource-cursed countries.