Escaping the Natural Resource Curse and the Dutch Disease? Norway's Catching up with and Forging ahead of Its Neighbors

Growth studies show, counter to intuition, that the discovery of a natural resource may be a curse rather than a blessing since resource-rich countries grow slower than others. Moreover, resource abundance may involve a displacement of a growth-essential manufacturing sector, leading to Dutch Disease. Norway is an important exception to the curse and the disease. Since oil production started in 1971 its overall growth has been remarkable side-by-side with phenomenal oil exports. At the same time, manufacturing has been performing well. This article uses neighbor countries Denmark and Sweden to highlight Norway's relative development. The article employs structural break techniques to demonstrate that Norway started a sudden acceleration in 1974, three years after having started oil extraction, and never slowed down. After catchingup with its neighbors, Norway surprisingly maintained a higher pace, and appears to have escaped the curse and the disease. This article establishes the fact through rigorous hypothesis testing before examining explanations of why Norway did escape.