The Dutch disease and its neutralization: a Ricardian approach

The Dutch disease is a major market failure originated in the existence of cheap and abundant natural or human resources that keep overvalued the currency of a country for an undetermined period of time, thus turning non profitable the production of tradable goods using technology in the state-of-the-art. It is an obstacle to growth on the demand side, because it limits investment opportunities. The severity of the Dutch disease varies according to the extent of the Ricardian rents involved, i.e., according to the difference between two exchange rate equilibriums: the ‘current’ or market rate and the ‘industrial’ rate - the one that make viable efficient tradable industries. Its main symptoms, besides overvalued currency, are low rates of growth of the manufacturing industry, artificially high real wages, and unemployment. Its neutralization requires managing the exchange rate. The principal instrument for that is a sales or export tax on the commodities that give origin to the Dutch disease. In order to neutralize it policymakers face major political obstacles since it involves taxing exports and reducing wages. Finally, this papers argues that there is an extended concept of Dutch disease: besides having its origin in natural resources, it may arise from cheap labor provided that the ‘wage spread’ in the developing country is considerably larger than in the developed one - a condition that is usually present.

A graphic explanation on how a tax on exports neutralizes the Dutch disease without costs to exporters

The adequate way of neutralizing the Dutch disease is the imposition of a variable tax on the export of the commodity that originates the disease. If such tax is equivalent to the "size" of the Dutch disease, it will shifts to the right its supply curve of the commodity in relation to the exchange rate, giving the existing domestic supply and the international demand, the exchange rate will depreciate at the value of the tax, and the equilibrium exchange rate will move from the "current" to the "industrial" equilibrium.

The value of the exchange rate and the Dutch disease

This paper revisits the original (2008) paper on the Dutch disease, which defined it by the existence of two exchange rate equilibriums (the current and the industrial exchange rate equilibriums). Its novelty is in claiming that, as we have a value and a market price for each good or service, we also have a value and a market price for foreign money. The value is the cost plus reasonable profit corresponding to the exchange rate that makes competitive the country's competent business enterprises; the nominal exchange rates floats around the value according to the demand and supply of foreign money. This basic distinction of the exchange rate in terms of value and in terms of price allows us to understand that the two equilibriums are defined in value terms, and opens room for a clear distinction of the policies that affect the value from the ones that affect the market price of the exchange rate.

Essays on the history of Brazilian dipterology: II. notices about Brazilian Diptera (17th century)

Essays on the history of Brazilian dipterology. II. Notices about Brazilian Diptera (17th century). Notices from the Brazilian Diptera from the 17th century come mainly from two foreign invasions occurred in Brazil, the first one by the French in Maranhão and the second by the Dutch in northeastern Brazil. This paper includes reports of Fathers Claude d'Abbeville and Yves d'Evreux and from Piso and Marcgrave, the last two presenting the first illustrations of Brazilian Diptera. The paper also includes reports of Friar Laureano de la Cruz, Father João de Sotto Mayor and Maurício de Heriarte.

Structuralist macroeconomics and the new developmentalism

This paper first presents some basic ideas and models of a structuralist development macroeconomics that complements and actualizes the ideas of the structuralist development economics that was dominant between the 1940s and the 1960s. A system of three models focusing on the exchange rate (the tendency to the cyclical overvaluation of the exchange rate, a critique of growth with foreign savings, and new a model of the Dutch disease) shows that it is not just volatile but chronically overvalued, and for that reason it is not just a macroeconomic problem; as a long term disequilibrium, it is in the core of development economics. Second, it summarizes "new developmentalism" - a sum of growth policies based on these models and on the experience of fast-growing Asian countries.

The industrial equilibrium exchange rate in Brazil: an estimation

This paper presents a methodology for calculating the industrial equilibrium exchange rate, which is defined as the one enabling exporters of state-of-the-art manufactured goods to be competitive abroad. The first section highlights the causes and problems of overvalued exchange rates, particularly the Dutch disease issue, which is neutralized when the exchange rate strikes the industrial equilibrium level. This level is defined by the ratio between the unit labor cost in the country under consideration and in competing countries. Finally, the evolution of this exchange rate in the Brazilian economy is estimated.

A JOINT EXPERIMENTAL ANALYSIS OF INVESTOR BEHAVIOR IN IPO PRICING METHODS

This article jointly examines the differences of laboratory versions of the Dutch clock open auction, a sealed-bid auction to represent book building, and a two-stage sealed bid auction to proxy for the “competitive IPO”, a recent innovation used in a few European equity initial public offerings. We investigate pricing, seller allocation, and buyer welfare allocation efficiency and conclude that the book building emulation seems to be as price efficient as the Dutch auction, even after investor learning, whereas the competitive IPO is not price efficient, regardless of learning. The competitive IPO is the most seller allocative efficient method because it maximizes offer proceeds. The Dutch auction emerges as the most buyer welfare allocative efficient method. Underwriters are probably seeking pricing efficiency rather than seller or buyer welfare allocative efficiency and their discretionary pricing and allocation must be important since book building is prominent worldwide.

Field data and prediction models of pesticide spray drift on coffee crop

The objective of this work was to generate drift curves from pesticide applications on coffee plants and to compare them with two European drift-prediction models. The used methodology is based on the ISO 22866 standard. The experimental design was a randomized complete block with ten replicates in a 2x20 split-plot arrangement. The evaluated factors were: two types of nozzles (hollow cone with and without air induction) and 20 parallel distances to the crop line outside of the target area, spaced at 2.5 m. Blotting papers were used as a target and placed in each of the evaluated distances. The spray solution was composed of water+rhodamine B fluorescent tracer at a concentration of 100 mg L-1, for detection by fluorimetry. A spray volume of 400 L ha-1 was applied using a hydropneumatic sprayer. The air-induction nozzle reduces the drift up to 20 m from the treated area. The application with the hollow cone nozzle results in 6.68% maximum drift in the nearest collector of the treated area. The German and Dutch models overestimate the drift at distances closest to the crop, although the Dutch model more closely approximates the drift curves generated by both spray nozzles.

Macroeconomia estruturalista do desenvolvimento

Structuralist development macroeconomics. This paper presents some basic ideas and models of a structuralist development macroeconomics (the tendencies to the overvaluation of the exchange rate and the tendency of wages to grow below productivity, the critique of growth with foreign savings, and a new model of the Dutch disease) that complement and actualize the thought of the Latin-American structuralist school that developed around ECLAC from the late 1940s to the 1960s. On the other hand, it suggests that a new national development strategy based on the experience of fast growing Asian countries is emerging; and argues that only the countries that adopt such strategy based on growth with domestic savings, fiscal and foreign trade responsibility and a competitive exchange rate will be able to catch up.

Variability of soil fertility properties in areas planted to sugarcane in the State of Goias, Brazil

Soil sampling should provide an accurate representation of a given area so that recommendations for amendments of soil acidity, fertilization and soil conservation may be drafted to increase yield and improve the use of inputs. The aim of this study was to evaluate the variability of soil fertility properties of Oxisols in areas planted to sugarcane in the State of Goias, Brazil. Two areas of approximately 8,100 m² each were selected, representing two fields of the Goiasa sugarcane mill in Goiatuba. The sugarcane crop had a row spacing of 1.5 m and subsamples were taken from 49 points in the row and 49 between the row with a Dutch auger at depths of 0.0-0.2 and 0.2-0.4 m, for a total of 196 subsamples for each area. The samples were individually subjected to chemical analyses of soil fertility (pH in CaCl2, potential acidity, organic matter, P, K, Ca and Mg) and particle size analysis. The number of subsamples required to compose a sample within the acceptable ranges of error of 5, 10, 20 and 40 % of each property were computed from the coefficients of variation and the Student t-value for 95 % confidence. The soil properties under analysis exhibited different variabilities: high (P and K), medium (potential acidity, Ca and Mg) and low (pH, organic matter and clay content). Most of the properties analyzed showed an error of less than 20 % for a group of 20 subsamples, except for P and K, which were capable of showing an error greater than 40 % around the mean. The extreme variability in phosphorus, particularly at the depth of 0.2-0.4 m, attributed to banded application of high rates of P fertilizers at planting, places limitations on assessment of its availability due to the high number of subsamples required for a composite sample.

The real mechanisms of the global economy

The paper presents the main arguments of Bresser Pereira's Globalization and Competition. Development strategies based on the 'conventional orthodoxy' are shown to carry serious drawbacks ("Dutch disease", pernicious effects of external saving, currency overvaluation), while a 'new developmentalism' is promoted, in spite of the widespread belief that the nation-states have been dispossessed of their room for manoeuvre because of the globalization process. The "new developmentalism" is based on domestic finance, balanced public budgets, moderate interest rates and competitiveness policies aimed at neutralizing the tendency to exchange rate overappreciation. The paper also points out a few theoretical questions the book raises.