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Resource Income and the Effect on Domestic Neighbours: A case study on Canadian Provinces

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  • Wessel N. Vermeulen

    ()
    (CREA, University of Luxembourg)

Abstract

Resource income in a multi-regional setting allows for differentiated impacts of windfalls on the industrial development of each region. A resource exporting region suffers from Dutch disease through a spending effect and a real exchange rate ap- preciation. Whereas, a neighboring region will suffer from the real exchange rate appreciation but the increased demand from the region with the resource income of tradable goods will increase the traded good sector in the neighboring region. For a 2-region 2-sector model the equilibrium conditions on the labour allocation between the sectors are derived taking into account resource potential windfalls. The model is tested on and supported by a panel dataset of Canadian provinces.

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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 13-05.

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Date of creation: 2013
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Handle: RePEc:luc:wpaper:13-05

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Keywords: Dutch Disease; interregional and international trade.;

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  1. Torvik, Ragnar, 2001. "Learning by doing and the Dutch disease," European Economic Review, Elsevier, vol. 45(2), pages 285-306, February.
  2. Obstfeld, Maurice & Rogoff, Kenneth, 2000. "Perspectives on OECD Economic Integration: Implications for US Current Account Adjustment," Center for International and Development Economics Research, Working Paper Series qt16z3s2s2, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
  3. Dissou, Yazid, 2010. "Oil price shocks: Sectoral and dynamic adjustments in a small-open developed and oil-exporting economy," Energy Policy, Elsevier, vol. 38(1), pages 562-572, January.
  4. Corden, W M, 1984. "Booming Sector and Dutch Disease Economics: Survey and Consolidation," Oxford Economic Papers, Oxford University Press, vol. 36(3), pages 359-80, November.
  5. Halvor Mehlum & Karl Moene & Ragnar Torvik, 2002. "Institutions and the resource curse," Development and Comp Systems 0210003, EconWPA.
  6. Michel Beine & Serge Coulombe & Wessel N. Vermeulen, 2012. "Dutch Disease and the Mitigation Effect of Migration: Evidence from Canadian Provinces," CREA Discussion Paper Series 12-06, Center for Research in Economic Analysis, University of Luxembourg.
  7. Kenneth Rogoff & William Brainard & George Perry, . "Global Current Account Imbalances and Exchange Rate Adjustments," Working Paper 33687, Harvard University OpenScholar.
  8. Frankel, Jeffrey A., 2010. "The Natural Resource Curse: A Survey," Scholarly Articles 4454156, Harvard Kennedy School of Government.
  9. Hamano, Masashige, 2014. "The Harrod–Balassa–Samuelson effect and endogenous extensive margins," Journal of the Japanese and International Economies, Elsevier, vol. 31(C), pages 98-113.
  10. Serge Coulombe, 2002. "International Trade, Interprovincial Trade, and Canadian Provincial Growth," Working Papers 0204E, University of Ottawa, Department of Economics.
  11. Michel Beine & Charles S. Bos & Serge Coulombe, 2009. "Does the Canadian Economy suffer from Dutch Disease?," Tinbergen Institute Discussion Papers 09-096/4, Tinbergen Institute.
  12. John F. Helliwell & Geneviève Verdier, 2001. "Measuring internal trade distances: a new method applied to estimate provincial border effects in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 34(4), pages 1024-1041, November.
  13. Corden, W Max & Neary, J Peter, 1982. "Booming Sector and De-Industrialisation in a Small Open Economy," Economic Journal, Royal Economic Society, vol. 92(368), pages 825-48, December.
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