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Not Dutch Disease, It's China Syndrome

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  • Macdonald, Ryan

Abstract

This paper empirically investigates how the Canadian economy has evolved following the rise in commodity prices and appreciation of the Canadian dollar that began in 2003. The adjustment in the manufacturing industry has garnered the greatest attention because it has borne the brunt of job losses. However, the adjustment of the manufacturing industry has not been straightforward. Rather, a complex reallocation has been taking place within manufacturing that has been predominantly due to the integration of emerging nations into the global economy. The increased commodity prices and falling manufactured prices caused by this integration have affected durable and non-durable manufacturing industries differently. Non-durable manufacturers have tended to see their competitiveness eroded and their output has tended to fall. Durable manufacturers, on the other hand, have increased output in response to the resource boom and increased demand in general. The result has been stable manufacturing output overall, accompanied by a re-orientation of manufacturing output away from non-durables and toward durables. The appreciated dollar and higher commodity prices have also led to a more widespread industrial reallocation in Canada. The higher commodity prices have started a resource boom, particularly in Alberta. The boom has led to rising resource industry employment, while manufacturing employment declined, and to rising service-sector employment. It has contributed to inter-provincial migration, and has greatly increased the purchasing power of Canadian incomes as terms of trade have improved.

Suggested Citation

  • Macdonald, Ryan, 2007. "Not Dutch Disease, It's China Syndrome," Insights on the Canadian Economy 2007017e, Statistics Canada, Economic Analysis Division.
    • Handle: RePEc:stc:stcp2e:2007017e
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    File URL: http://www.statcan.gc.ca/bsolc/olc-cel/olc-cel?catno=11-624-M2007017&lang=eng
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    References listed on IDEAS

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    1. 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.
    2. 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.
    3. Ulrich Kohli, 2006. "Real GDP, Real GDI and Trading Gains: Canada, 1981-2005," International Productivity Monitor, Centre for the Study of Living Standards, vol. 13, pages 46-56, Fall.
    4. Macdonald, Ryan, 2007. "Real GDP and the Purchasing Power of Provincial Output," Economic Analysis (EA) Research Paper Series 2007046e, Statistics Canada, Analytical Studies Branch.
    5. Diewart, W Erwin & Morrison, Catherine J, 1986. "Adjusting Output and Productivity Indexes for Changes in the Terms of Trade," Economic Journal, Royal Economic Society, vol. 96(383), pages 659-679, September.
    6. Kohli, Ulrich, 2004. "Real GDP, real domestic income, and terms-of-trade changes," Journal of International Economics, Elsevier, vol. 62(1), pages 83-106, January.
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    Cited by:

    1. Michael-John Almon & Jianmin Tang, 2011. "Industrial Structural Change and the Post-2000 Output and Productivity Growth Slowdown: A Canada-U.S. Comparison," International Productivity Monitor, Centre for the Study of Living Standards, vol. 22, pages 44-81, Fall.
    2. Shutao Cao & Danny Leung, 2010. "Labour Reallocation, Relative Prices and Productivity," Staff Working Papers 10-2, Bank of Canada.
    3. Dehghan Nejad, Omid, 2011. "The review of financial repression policies and banking system in Iran," MPRA Paper 30924, University Library of Munich, Germany.

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    International trade; Labour; Manufacturing;
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