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

Wessel Vermeulen

DEM Discussion Paper Series from Department of Economics at the University of 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.

Keywords: Dutch Disease; interregional and international trade. (search for similar items in EconPapers)
JEL-codes: C23 E24 F16 F41 R11 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:luc:wpaper:13-05

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