Productivity spillovers. Offshore petroleum as Norway's Space Race?

Oil-rich Norway is often said to have avoided Dutch disease and realized sizable productivity spillovers because its offshore petroleum sector is knowledge-based, demands advanced technological solutions, and rests on a nationally-based supplier industry. Using investment and profitability data from Norwegian National Accounts and official corporate communication from oil and gas companies, this paper identifies features of offshore petroleum that help explain why its productivity spillovers exceed those of other Norwegian high-investment industries. Our evidence indicates that what most distinguishes Norwegian offshore petroleum is a large-scale, long-horizon investment program with substantial upside and profitability contingent on continued investment —a configuration that amplifies collaboration incentives and sustains spillovers. We argue that none of the proposed “green” industries exhibit this combination of characteristics, so that while these new green industries may become important to the Norwegian economy in many ways, expecting productivity spillovers on a par with offshore petroleum is unrealistic. The magnitude of spillovers we document is sufficiently large to invite comparison—on a relative basis—to those associated with the U.S. Cold War Space Race. • What explains the large productivity spillovers from Norwegian offshore petroleum is not simply that it is knowledge-based, demands advanced technological solutions, and rests on a nationally-based supplier industry, but that it is a large-scale, long-horizon investment program with substantial upside and profitability contingent on continued investment. None of the proposed “green” industries exhibit this combination of characteristics, so that while these new green industries may become important to the Norwegian economy in many ways, expecting productivity spillovers on a par with offshore petroleum is unrealistic. The magnitude of spillovers we document is sufficiently large to invite comparison—on a relative basis—to those associated with the U.S. Cold War Space Race.