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Closing the 49th Parallel: An Unexplored Episode in Canadian Economic and Political History

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  • James B. Davies
  • Stanley L. Winer

Abstract

We draw attention to, and begin to consider the implications of, the severe restrictions on emigration by Canadians to the United States introduced under the US Immigration Act of 1965. These restrictions came into effect in 1968 and lasted until mobility began to increase to some extent under the free trade agreements in the early 1990s. This is an unusual episode in Canadian history, the implications of which for the Canadian economy and for Canadian public policy appear to have received little attention. We assemble evidence that suggests that the near closing of the border led toward uncoupling of Canadian and US labour markets and to a decrease in the elasticity of labour supply in Canada. Implications for Canadian fiscal policy of a decline in labour elasticity are then derived using a model of equilibrium fiscal structure. We show that these predictions, including heavier taxation of labour income and an increase in the overall size of the public sector, are consistent with what occurred over the two decades after the near closing of the US border, as well as with the partial reopening following the free trade agreements. The analysis continues by acknowledging additional factors that determine the structure and size of the public sector, and by considering the near closing of the border in a broader historical context. We conclude with a prediction about the future course of Canada-US migration policy that follows from our analysis.

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File URL: http://dx.doi.org/10.3138/cpp.37.3.307
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Bibliographic Info

Article provided by University of Toronto Press in its journal Canadian Public Policy.

Volume (Year): 37 (2011)
Issue (Month): 3 (September)
Pages: 307-341

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Handle: RePEc:cpp:issued:v:37:y:2011:i:3:p:307-341

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  1. J. Ferris & Soo-Bin Park & Stanley Winer, 2008. "Studying the role of political competition in the evolution of government size over long horizons," Public Choice, Springer, Springer, vol. 137(1), pages 369-401, October.
  2. James B. Davies & Junsen Zhang, 1996. "Measuring Marginal Income Tax Rates for Individuals in Canada: Averages and Distributions over Time," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 29(4), pages 959-75, November.
  3. Toke Aidt & Peter Jensen, 2009. "Tax structure, size of government, and the extension of the voting franchise in Western Europe, 1860–1938," International Tax and Public Finance, Springer, Springer, vol. 16(3), pages 362-394, June.
  4. Saikkonen, Pentti, 1991. "Asymptotically Efficient Estimation of Cointegration Regressions," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 7(01), pages 1-21, March.
  5. David E. Wildasin, 2003. "Fiscal Policy, Human Capital, and Canada-US Labor Market Integration," Public Economics, EconWPA 0309006, EconWPA.
  6. MacKinnon, James G, 1996. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 11(6), pages 601-18, Nov.-Dec..
  7. Emmanuel Saez & Michael R. Veall, 2005. "The Evolution of High Incomes in Northern America: Lessons from Canadian Evidence," American Economic Review, American Economic Association, American Economic Association, vol. 95(3), pages 831-849, June.
  8. Tridimas, George & Winer, Stanley L., 2005. "The political economy of government size," European Journal of Political Economy, Elsevier, Elsevier, vol. 21(3), pages 643-666, September.
  9. Stanley Winer & Michael Tofias & Bernard Grofman & John Aldrich, 2008. "Trending economic factors and the structure of Congress in the growth of government, 1930–2002," Public Choice, Springer, Springer, vol. 135(3), pages 415-448, June.
  10. Dennis Mueller, 1998. "Constitutional Constraints on Governments in a Global Economy," Constitutional Political Economy, Springer, Springer, vol. 9(3), pages 171-186, September.
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  1. Exit!
    by Eric Crampton in Offsetting Behaviour on 2011-10-07 18:00:00
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Cited by:
  1. Giuranno, Michele G. & Rongili, Biswas, 2012. "Inter-jurisdictional migration and the size of government," MPRA Paper 42604, University Library of Munich, Germany.
  2. Osberg, Lars, 2013. "Instability implications of increasing inequality: Evidence from North America," Economic Modelling, Elsevier, Elsevier, vol. 35(C), pages 918-930.

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