Timothée Demont: timothee.demont[at]univ-amu.fr
Eva Raiber: eva.raiber[at]univ-amu.fr
Persistently low world oil prices are stimulating tradable sectors in oil-exporting countries. I use a three-location open economy model to investigate the prospects for reverse Dutch disease in African countries with a comparative advantage in agriculture but large internal and external trade costs. While falling resource revenues lead factors of production to shift into agriculture, remote farmers can lose when trade costs make agricultural goods behave like non-tradables. Household survey data from Nigeria shows a significant agricultural supply response that is correlated with exposure to international markets. Counterfactual simulations show that lowering trade costs and boosting agricultural productivity can help offset the lost income from oil.