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

  • Wessel N. Vermeulen

    ()

    (CREA, Université du Luxembourg)

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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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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  1. Torvik, Ragnar, 2001. "Learning by doing and the Dutch disease," European Economic Review, Elsevier, vol. 45(2), pages 285-306, February.
  2. Halvor Mehlum & Karl Moene & Ragnar Torvik, 2004. "Institutions and the Resource Curse," DEGIT Conference Papers c009_012, DEGIT, Dynamics, Economic Growth, and International Trade.
  3. Beine, Michel & Bos, Charles S. & Coulombe, Serge, 2012. "Does the Canadian economy suffer from Dutch disease?," Resource and Energy Economics, Elsevier, vol. 34(4), pages 468-492.
  4. 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.
  5. Masashige Hamano, 2011. "The Harrod-Balassa-Samuelson effect and endogenous extensive margins," CREA Discussion Paper Series 11-21, Center for Research in Economic Analysis, University of Luxembourg.
  6. Jeffrey A. Frankel, 2010. "The Natural Resource Curse: A Survey," NBER Working Papers 15836, National Bureau of Economic Research, Inc.
  7. 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.
  8. Kenneth Rogoff & William Brainard & George Perry, . "Global Current Account Imbalances and Exchange Rate Adjustments," Working Paper 33687, Harvard University OpenScholar.
  9. 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.
  10. Serge Coulombe, 2002. "International Trade, Interprovincial Trade, and Canadian Provincial Growth," Working Papers 0204E, University of Ottawa, Department of Economics.
  11. Michel Beine & Serge Coulombe & Wessel Vermeulen, 2015. "Dutch Disease and the Mitigation Effect of Migration: Evidence from Canadian Provinces," OxCarre Working Papers 151, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
  12. 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.
  13. 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.
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