Part 4/8:
The Dutch disease fundamentally revolves around the adverse effects of a booming resource sector on a country’s other industries. As the oil sector grows, it can lead to rising currency values and evolving wage structures that favor services over industry. This phenomenon typically comes with a diminishing focus on manufacturing, which can stifle overall economic diversification.
In Russia's case, empirical studies indicate that a 1% rise in oil prices correlates with a 0.5% appreciation in the ruble. Furthermore, while wages in the oil sector soared, the growth in the manufacturing sector lagged behind, mirroring the classic symptoms associated with Dutch disease.