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

51 Pages Posted: 15 May 2012

See all articles by Michel A. R. Beine

Michel A. R. Beine

University of Luxemburg; CESifo (Center for Economic Studies and Ifo Institute)

Serge Coulombe

University of Ottawa - Department of Economics

Wessel Vermeulen

OXCARRE

Date Written: May 15, 2012

Abstract

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 labor 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.

Keywords: natural resources, Dutch disease, immigration, mitigation effect

JEL Classification: F220, O150, R110, R150

Suggested Citation

Beine, Michel A. R. and Coulombe, Serge and Vermeulen, Wessel, Dutch Disease and the Mitigation Effect of Migration: Evidence from Canadian Provinces (May 15, 2012). CESifo Working Paper Series No. 3813, Available at SSRN: https://ssrn.com/abstract=2059979 or http://dx.doi.org/10.2139/ssrn.2059979

Michel A. R. Beine (Contact Author)

University of Luxemburg ( email )

L-1511 Luxembourg
Luxembourg

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Serge Coulombe

University of Ottawa - Department of Economics ( email )

200 Wilbrod Street
Ottawa, Ontario K1N 6N5
Canada

Wessel Vermeulen

OXCARRE ( email )

Mansfield Road
Manor Road Building,Manor Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

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