Dutch Disease and the crime epidemic: an investigation of the mineral boom in Papua New Guinea

Papua New Guinea has pinned its hopes for economic development on its mineral wealth but, so far, this has been a false promise. Given Papua New Guinea’s vulnerability, this raises questions of a Dutch Disease effect. Dutch Disease is dismissed in principle, but an appreciating real exchange rate is considered to have important offsetting economic consequences via its implications for crime. Using a CGE model incorporating crime as an economic activity, the contribution to welfare of a resources boom is investigated. The results confirm that a resources boom will deliver a net welfare benefit, but far smaller than the revenues generated would suggest, and at a cost to equity.