The Economic Effects of North Sea Oil on the Manufacturing Sector

This paper analyses the economic effects of the oil and gas sector (energy booms) on manufacturing output in two energy producing countries: Norway and the UK. In particular, I investigate whether there is evidence of a ‘Dutch disease’, that is whether energy booms have had adverse effects on manufactures. In addition to energy booms, three other types of structural disturbances are identified; demand, supply and oil price shocks. The different disturbances are identified by imposing dynamic restrictions on a vector autoregressive model. Overall, there is only weak evidence of a Dutch disease in the UK, whereas manufacturing output in Norway has actually benefited from energy discoveries and higher oil prices