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

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Listed author(s):
  • 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.

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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
Handle: RePEc:luc:wpaper:13-05
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More information through EDIRC

Keywords: Dutch Disease; interregional and international trade.;

Find related papers by 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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  1. 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.
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  3. Michel Beine & Serge Coulombe & Wessel N. Vermeulen, 2015. "Dutch Disease and the Mitigation Effect of Migration: Evidence from Canadian Provinces," Economic Journal, Royal Economic Society, vol. 125(589), pages 1574-1615, December.
  4. Corden, W M, 1984. "Booming Sector and Dutch Disease Economics: Survey and Consolidation," Oxford Economic Papers, Oxford University Press, vol. 36(3), pages 359-380, November.
  5. 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.
  6. Maurice Obstfeld & Kenneth S. Rogoff, 2000. "Perspectives on OECD economic integration : implications for U.S. current account adjustment," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 169-208.
  7. Torvik, Ragnar, 2001. "Learning by doing and the Dutch disease," European Economic Review, Elsevier, vol. 45(2), pages 285-306, February.
  8. 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.
  9. Maurice Obstfeld & Kenneth S. Rogoff, 2005. "Global Current Account Imbalances and Exchange Rate Adjustments," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 36(1), pages 67-146.
  10. Serge Coulombe, 2002. "International Trade, Interprovincial Trade, and Canadian Provincial Growth," Working Papers 0204E, University of Ottawa, Department of Economics.
  11. Frankel, Jeffrey A., 2010. "The Natural Resource Curse: A Survey," Scholarly Articles 4454156, Harvard Kennedy School of Government.
  12. 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.
  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 825-848, December.
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