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Windfall Resource Income, Productivity Growth, and Manufacturing Employment

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  • Talan İşcan

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Abstract

I study the independent impacts of windfall income from non-renewable resource exports and productivity growth on the changing share of employment in manufacturing in an open economy. The framework includes non-unitary income and substitution elasticities, so that both windfall income and productivity growth lead to sectoral reallocation of labor. I use the model to account for the declining share of manufacturing employment in Canada. I find that the relative importance of these factors has varied over time. While productivity growth is responsible for a substantial fraction of the decline in the share of manufacturing employment since 1960, the windfall income from the booming resource sector contributed to this decline significantly during the 2000s, when the Canadian terms of trade improved rather dramatically. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Talan İşcan, 2015. "Windfall Resource Income, Productivity Growth, and Manufacturing Employment," Open Economies Review, Springer, vol. 26(2), pages 279-311, April.
  • Handle: RePEc:kap:openec:v:26:y:2015:i:2:p:279-311
    DOI: 10.1007/s11079-014-9330-z
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    References listed on IDEAS

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    Cited by:

    1. Murat Ungor, 2017. "Productivity Growth and Labor Reallocation: Latin America versus East Asia," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 24, pages 25-42, March.

    More about this item

    Keywords

    Structural change; Booming sector; Productivity growth; Sectoral resource reallocation; F41; O14; O41;

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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