An empirical test of the Dutch Disease hypothesis on Botswana's main exports

Although the Dutch Disease (DD) model clearly predicts that a resource boom always hurt a country's manufacturing exports, the case of Botswana however defies this predicted resource curse. Whilst qualitative literature describes how the country has managed to avoid the resource curse hook, this study econometrically test the DD hypothesis on the country's main export products from the manufacturing, mining and agriculture sectors. The study employed the gravity trade model to test this hypothesis. Estimated results indicated that, diamond exports, instead of hurting the country's exports, it rather boosted exports from manufacturing, mining and agricultural sectors.