Dutch Disease and the Mitigation Effect of Migration: Evidence from Canadian Provinces

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This paper looks at whether immigration can mitigate the Dutch disease effects associated with booms in natural resource sectors. We first derive predicted changes in the size of the non-tradable sector from a small general-equilibrium model à la Obstfeld-Rogoff, supplemented by a resource income and a varying labour supply. Using data for Canadian provinces, we test for the existence of a mitigating effect of immigration in terms of an increase in the size of the non-tradable sector triggered by the positive resource shock in booming regions. We find evidence of such an effect for the aggregate inflow of migrants. Disentangling those flows by type of migrants, we find that the mitigation effect is due mostly to interprovincial migration and temporary international migration. There is no evidence of such an effect for permanent international immigration. Nevertheless, interprovincial migration also results in a spreading effect of Dutch disease from booming to non-booming provinces. Terms of use: Documents inJEL-Code: F220, O150, R110, R150.

The relationship between immigration and unemployment: Panel data evidence from Canada

“…So far, a couple of studies have focused on this issue using time series data (Gross, 2004;Islam, 2007). Recently, another couple of studies used panel data to examine labor market impact of immigration (Beine et al, 2014;Gross and Schmitt, 2012). However, Gross and Schmitt (2012) focused on temporary immigration while Beine et al (2014) examined Dutch disease issue.…”

“…Recently, another couple of studies used panel data to examine labor market impact of immigration (Beine et al, 2014;Gross and Schmitt, 2012). However, Gross and Schmitt (2012) focused on temporary immigration while Beine et al (2014) examined Dutch disease issue. To the best knowledge of this author, so far no study used province specific panel data to examine the impact of permanent international immigration on unemployment rate in Canada.…”

Emergence of sovereign wealth funds

“…Open capital markets and labour migration combined with flexible labour markets can significantly accommodate Dutch disease effects (Raveh, 2013;Beine et al, 2014).…”

Natural resources, decentralization, and risk sharing: Can resource booms unify nations?

“…In the …rst stage, before the price of minerals is known, CG and RG are elected democratically by the inhabitants of the whole country and the ones of region 2, respectively. 9 At that time, a decision of whether or not to pursue a secession 8 The one-period budget constraints (4) and (5) must always hold. This is clearly a simpli…cation of the model.…”

“…Indeed, recent studies indicate that resource-booming local governments are able to mitigate the adverse e¤ects of resources, and even grow on the account of their neighboring resource poor regions, in …scally decentralized and federalized economies (Beine et al (2014), Cai and Treisman (2005), Papyrakis and Raveh (2014), and Raveh (2013)). …”