Serge Coulombe

Convergence across Canadian Provinces, 1961 to 1991

The purpose of this study is to provide a new look at the evolution of regional disparities in Canada in the light of the recent convergence studies produced by European and American economists. The degree of convergence of a variety of per capita income and output measures from 1961 to today is analysed. The empirical analysis suggests that there is evidence of convergence in Canada for different measurements of per capita income and output since the early 1960s. During this period convergence has been helped by a favorable change in terms of trade and by government transfers and taxes. Our estimates of the convergence speed for Canadian provinces are of the same magnitude as those found for regions within the same country, and across countries, in European and American studies.

Human Capital and Regional Convergence in Canada

Proposes an empirical analysis of regional convergence in Canada based on the growth model of Barro et al. In an open economy with perfect capital mobility, if domestic residents cannot borrow abroad with human capital as collateral, the dynamics of human capital accumulation is the driving force of per capita income growth. Empirical results indicate that, as predicted by the theoretical model, various indicators of the stock of human capital did converge at the same speed as per capita income during the 1951‐1996 period. A substantial part of the relative growth of per capita income indicators across Canadian provinces since the early 1950s could be explained by the convergence process of human capital indicators based on the percentage of the population, both sexes and males, who have at least a university degree. The estimates of the human capital share in national income based on those indicators are in the neighbourhood of 0.5, a number consistent with other measures of the implicit income share of human capital. The convergence speed of per capita income at the regional level might have been two to three times faster, if all persons had invested in education at the same rate as the young.

Internal Migration, Asymmetric Shocks, and Interprovincial Economic Adjustments in Canada

This article provides an empirical analysis of the role of labor mobility in the intranational (interprovincial) macroeconomic adjustment process in Canada. This analysis is based on a pooled time-series cross-section econometric setup of net migration flows across age groups between the ten Canadian provinces since 1977. The results indicate that interprovincial migration is driven by structural factors such as the long-run regional differential in unemployment rates, labor productivity, and the rural/urban differential structure of the provinces. Furthermore, it appears that interprovincial migration is not that sensitive to regional asymmetric shocks at the business cycle horizon. Finally, using a conditional convergence model of human capital, the author estimates that migration has a powerful effect on the redistribution of human capital across Canadian provinces. With the interprovincial migration process, human capital is redistributed from the more rural to the predominantly urban provinces and from the poor to the rich provinces.

Economic Growth and Regional Income Disparities in Canada and the Northern United States

This paper compares the evolution of regional disparaties in per capita incomes in Canada and the 12 American states along Canadas southern border. The phenomenon of capital accumulation as described by the neoclassical growth model can explain much of the observed decline in regional dispersion in Canada relative to the northern states. However, it appears that Canadians are more likely than residents of the northern states to remain in regions where they do not have jobs, a factor which contributes to the persistently higher level of regional dispersion of output per capita in Canada.

Does the Canadian economy suffer from Dutch disease

We argue that the failure to disentangle the evolution of the Canadian currency from the U.S. currency leads to potentially incorrect conclusions regarding the case of Dutch disease in Canada. We propose a new approach that is aimed at extracting both currency components and energy- and commodity-price components from observed exchange rates and prices. We first analyze the separate influence of commodity prices on the Canadian and the U.S. currency components. We then estimate the separate impact of the two currency components on the shares of manufacturing employment in Canada. We show that between 33 and 39 per cent of the manufacturing employment loss that was due to exchange rate developments between 2002 and 2007 is related to the Dutch disease phenomenon. The remaining proportion of the employment loss can be ascribed to the weakness of the U.S.

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

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 `a 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.

Regional Perspectives on Dollarization in Canada

In this paper we investigate whether it is preferable for Canadian regions to individually adopt the U.S. dollar or to remain with the current currency arrangement. The empirical analysis focuses on the cross-correlations of various business cycle measures of Canadian regions, of Canada, and of the United States. The business cycle investigation is completed by the analysis of two other important criteria for optimum currency areas, industrial specialization and trade interdependence. Our results highlight a significant heterogeneity across Canadian provinces. In particular, it transpires that it could be economically advantageous for the central provinces of Ontario and Quebec and to a lesser extent British Columbia to adopt the U.S. dollar. In contrast, it is not as clear what the other regions should do, the final answer depending on the path the larger three provinces take.

Skills, Education, and Canadian Provincial Disparity

We derive synthetic time series over the 1951-2001 period of the skills of labor market entrants for the 10 Canadian provinces from the 2003 ALL survey. The effect of the skills variable on regional income is significant and substantial. Skills acquired by one extra year of schooling result in an increase in per capita income of around 5 percent, which is close to microeconomic Mincerian estimates. Our literacy indicator does not outperform human capital indicators based on education. This contrasts sharply with recent cross-country evidence and suggests substantial measurement error in cross-country schooling data. Copyright Blackwell Publishing, Inc. 2007

Human capital quality and the immigrant wage gap

We propose a new methodology for analyzing determinants of the wage gap between immigrants and natives. A Mincerian regression framework is extended to include GDP per capita in an immigrant’s country of birth as a proxy for the quality of schooling and work experience acquired in that country. We find that Canadian immigrants’ returns to schooling and work experience significantly increase with the GDP per capita of their country of birth. The contribution of quality of schooling and work experience to the immigrant wage gap is also examined. Lower human capital quality completely negates the endowment advantage that immigrants have in the areas of schooling and work experience. Since data on GDP per capita are available for most countries over long periods, the proposed methodology can be applied to analyze immigrant wage gaps for a large set of countries for which common statistics on natives and immigrants are available.JEL codesJ20, J24, J15, J61

Intranational Trade Diversion, the Canada-United States Free Trade Agreement, and the L Curve

Abstract This paper provides an empirical analysis of the comparative evolution of intranational and international trade in the Canadian provinces since 1981. We establish a striking empirical fact, the L curve, that characterizes the comparative evolution of intranational (interprovincial) and international trade shares to GDP between 1981 and 2000. We also use a panel data model to evaluate the impact of changing trade costs induced by the CUSFTA on the intensity of international and interprovincial trade. The analysis casts doubt on the intranational trade diversion hypothesis, common in trade models such as the structural gravity model of Anderson and van Wincoop (2003) that was used recently to revisit the Canada–U.S. border effect. International trade appears to complement rather than substitute for interprovincial trade.