The Impact of Dutch disease on Income Inequality in selected Petroleum Exporting Countries of Ecuador, Iran & Nigeria

Unequal income distribution is one of the important outcomes of resource curse. Although more resource curse focuses on the impact of resource abundance on economic growth, the same factors decreasing economic growth are also a cause of inequality in income distribution. One of the reasons behind it is Dutch disease and debilitating the local tradable sectors which occurs as a result of booming non-tradable economy and weakening local non-tradable sectors due to strengthening national currency and importing tradable goods. The main aim of this paper is to evaluate the effectiveness of Dutch disease on income distribution in selected Petroleum Exporting countries (Ecuador, Iran, Nigeria) respectively. The result of using fixed effects model in the selected countries within the time period of 1990-2014 indicated: That the ratio of added value share in service sectors to GDP to the ratio of added value of industry sector to GDP as an indicator of Dutch disease has a significantly positive effect on Gini Index as an indicator of income distribution. An increase in the ratio of non-tradable to tradable products changes the composition of GDP in favor of the service and building sectors and to the detriment of agriculture and industry sectors. This can have a negative effect on economic growth and income distribution because building and service sectors, especially the latter, has fewer upstream and downstream links than the agriculture and industry ones, especially the latter, which weaken the economic growth and leave unfavorable effects on income distribution.