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Oil Discovery, Boom-Bust Cycle and Manufacturing Slowdown: Evidence from a Large Industry Level Dataset

Author

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  • Nouf Alsharif

    (Department of Economics, University of Sussex, BN1 9SL Falmer, United Kingdom)

  • Sambit Bhattacharyya

    (Department of Economics, University of Sussex, BN1 9SL Falmer, United Kingdom)

Abstract

We investigate the effects of giant oil discovery and boom-bust price cycle on manufacturing using a large dataset of up to 49481 two-digit industry-years across 136 countries over the period 1962 to 2012. We find that oil discovery reduces growth in manufacturing value added and wages. The effect on employment is insignificant. We also find strong association between oil discovery and manufacturing slowdown episodes. Oil price boom and bust both negatively affects manufacturing perhaps due to increasing input cost (boom) and declining demand (bust). We do not find any evidence in favor of a real exchange rate appreciation driven effect as outlined in standard Dutch Disease models. We speculate that the effect is primarily driven by an increase in the cost of locally sourced manufacturing input.

Suggested Citation

  • Nouf Alsharif & Sambit Bhattacharyya, 2022. "Oil Discovery, Boom-Bust Cycle and Manufacturing Slowdown: Evidence from a Large Industry Level Dataset," Working Paper Series 0222, Department of Economics, University of Sussex Business School.
    • Handle: RePEc:sus:susewp:0222
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    More about this item

    Keywords

    Oil discovery; Boom-Bust; Manufacturing growth;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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