Fact box 4.6 Productivity effects on the wider economy

“Traditional theory assumes that production of resources has limited spin-offs to other industry. If anything, the effect is negative so that increased activity in the oil sector, for example, will displace traditional industries (known as the “Dutch disease”).

The problem with the classic Dutch-disease model is that it assumes production of raw materials just happens. To put it simply, the model assumes knowledge is imported and the process of producing raw materials is virtually automated. Our starting point is that this hardly seems to describe Norway’s petroleum sector and supplier industry.

Instead, we maintain that recovering oil and gas (upstream) and delivering it securely and in accordance with customer requirements (downstream) call for knowledge and technology. If one then allows that knowledge and technology can be transmitted to other industries, the predictions of classical theory are inverted. Raw material wealth can then lead to higher productivity growth in the whole economy ... In other words, the supplier sector, with its hi-tech knowledge, can be an engine for growth in the rest of industry. That generates positive externalities.“ Bjørnland and Torvik [13].