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Dutch Disease and the Mitigation Effect of Migration: Evidence from Canadian Provinces

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  • Michel Beine

    ()
    (CREA, University of Luxembourg, IRES, CREAM and CES-Ifo)

  • Serge Coulombe

    ()
    (University of Ottawa)

  • Wessel N. Vermeulen

    ()
    (CREA, University of Luxembourg)

Abstract

This paper looks at whether immigration can mitigate the Dutch disease effects associated with booms in natural resource sectors. We first derive predicted changes in the size of the non-tradable sector from a small general-equilibrium model `a la Obstfeld-Rogoff, supplemented by a resource income and a varying labour supply. Using data for Canadian provinces, we test for the existence of a mitigating effect of immigration in terms of an increase in the size of the non-tradable sector triggered by the positive resource shock in booming regions. We find evidence of such an effect for the aggregate inflow of migrants. Disentangling those flows by type of migrants, we find that the mitigation effect is due mostly to interprovincial migration and temporary international migration. There is no evidence of such an effect for permanent international immigration. Nevertheless, interprovincial migration also results in a spreading effect of Dutch disease from booming to non-booming provinces.

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File URL: http://wwwfr.uni.lu/content/download/52838/632021/file/2012-06%20-%20Dutch%20Disease%20and%20the%20Mitigation%20Effect%20of%20Migration%20-%20Evidences%20from%20Canadian%20Provinces.pdf
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Bibliographic Info

Paper provided by Center for Research in Economic Analysis, University of Luxembourg in its series CREA Discussion Paper Series with number 12-06.

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Date of creation: 2012
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Handle: RePEc:luc:wpaper:12-06

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Keywords: Natural Resources; Dutch Disease; Immigration; Mitigation Effect;

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Cited by:
  1. Michel Beine & Serge Coulombe, 2014. "Immmigration and Internal Mobility in Canada," CESifo Working Paper Series 4823, CESifo Group Munich.
  2. James CUST & Ridwan D. RUSLI, 2014. "The economic spillovers from resource extraction: a partial resource blessing at the subnational level?," Economic Growth centre Working Paper Series 1402, Nanyang Technolgical University, School of Humanities and Social Sciences, Economic Growth centre.
  3. Wessel N. Vermeulen, 2013. "Resource Income and the Effect on Domestic Neighbours: A case study on Canadian Provinces," CREA Discussion Paper Series 13-05, Center for Research in Economic Analysis, University of Luxembourg.
  4. Benjamin Dachis, 2012. "Stuck in Place: The Effect of Land Transfer Taxes on Housing Transactions," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 364, October.

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