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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, Université du 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.

Suggested Citation

  • Wessel N. Vermeulen, 2013. "Resource Income and the Effect on Domestic Neighbours: A case study on Canadian Provinces," DEM Discussion Paper Series 13-05, Department of Economics at the University of Luxembourg.
  • Handle: RePEc:luc:wpaper:13-05
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Dutch Disease; interregional and international trade.;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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