Should Canada Diversify its Trade Pattern? An Overlapping- Generations CGE Analysis of Trade and Ageing

Patrick Georges, Marcel Mérette () and Aylin Seckin§ ()
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Marcel Mérette: Department of Economics, University of Ottawa
Aylin Seckin§: Department of Economics, Istanbul Bilgi University, Kurtulus Deresi Cad. No 47, Dolapdere, Istanbul, Turkey.

No 0906E, Working Papers from University of Ottawa, Department of Economics

Abstract: A recurrent theme from politicians and commentators alike is that Canada is too exposed to the U.S. economy and could benefit from diversifying its trade pattern. In this paper we examine the validity of these calls in a context of world demographic changes. Although population ageing in Canada is expected to have a negative impact on welfare, international trade should prop up real consumption per capita through terms of trade improvements during the first half of the 21st century. This reflects a population ageing gap between Canada and many of its trading partners with younger populations whose demographic projections entail relatively smaller negative supply shocks and lesser relative price increases. The gains resulting from the globalization of trade flows might be intensified through an accurate pattern of North-South trade diversification that takes into account the extent and timing of population ageing in diverse regions of the world. The main policy implication of this analysis is that a diversification of Canada’s trade away from the U.S. in favor of faster-ageing countries such as Japan or Europe is not necessarily desirable.

Keywords: Globalization; trade diversification; ageing; overlapping generations; computable general equilibrium modeling (search for similar items in EconPapers)
JEL-codes: C68 D58 F13 F15 J11 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2009
New Economics Papers: this item is included in nep-age
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Citations: View citations in EconPapers (3)

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Working Paper: Should Canada Diversify its Trade Pattern? An Overlapping-Generations CGE Analysis of Trade and Ageing (2009)
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