Should Canada Diversify its Trade Pattern? An Overlapping- Generations CGE Analysis of Trade and Ageing
AbstractA recurrent theme from politicians and commentators alike is that Canada is too exposed to the U.S. economy and could benefit from diversifying its trade pattern. In this paper we examine the validity of these calls in a context of world demographic changes. Although population ageing in Canada is expected to have a negative impact on welfare, international trade should prop up real consumption per capita through terms of trade improvements during the first half of the 21st century. This reflects a population ageing gap between Canada and many of its trading partners with younger populations whose demographic projections entail relatively smaller negative supply shocks and lesser relative price increases. The gains resulting from the globalization of trade flows might be intensified through an accurate pattern of North-South trade diversification that takes into account the extent and timing of population ageing in diverse regions of the world. The main policy implication of this analysis is that a diversification of Canada’s trade away from the U.S. in favor of faster-ageing countries such as Japan or Europe is not necessarily desirable.
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Bibliographic InfoPaper provided by University of Ottawa, Department of Economics in its series Working Papers with number 0906E.
Length: 47 pages
Date of creation: 2009
Date of revision:
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Globalization; trade diversification; ageing; overlapping generations; computable general equilibrium modeling;
Find related papers by JEL classification:
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F15 - International Economics - - Trade - - - Economic Integration
- J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
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