Is Canada Suffering from ‘Dutch Disease’?

Several recent studies have been in the news concerning the concept of “Dutch disease” in Canada.

 

Dutch Disease or Failure to Compete: A Diagnosis of Canada’s Manufacturing Woes, was published by the Institute for Research on Public Policy, and examines the linkages for 80 different manufacturing industries using an empirical model that accounts for changes in global demand and competitive pressures as well as energy-induced strengthening of the dollar. Their results show that only 25 of the 80 industries show a significant negative relationship between the US-Canada exchange rate and output – mostly small labour-intensive industries such as textiles and apparel. Interestingly in light of the recently announced layoffs at GM Oshawa, the study concludes that “automotive industries do not show symptoms of Dutch disease; their weakness stems from cyclical changes in demand and lagging productivity growth”.

 

The Pembina Institute and The Macdonald Laurier Institute both released their own studies on this issue on May 30. The Macdonald Laurier Institute has released a commentary titled, No Dutch Treat: Oil and Gas Wealth Benefits All of Canada. In this report, authors Robert Murphy and Brian Crowley argue that even provinces not directly involved in oil and gas enjoy large gains from such activity in other provinces.

 

The Pembina report, In the Shadow of the Boom: How oil sands development is reshaping Canada’s economy, reviews the extent to which oil sands production and exports are affecting Canada’s economy, and explores the longer-term economic implications of increased reliance on oil sands expansion to support economic growth and generate public revenue.

 

LINKS:

 

Dutch Disease or Failure to Compete? published by Institute for Research in Public Policy (IRPP): http://www.irpp.org/pubs/IRPPstudy/IRPP_Study_no30.pdf

 

No Dutch Treat:Oil and Gas Wealth Benefits All of Canada,

(MacDonald Laurier Study) press release and link to full document is at:

http://www.macdonaldlaurier.ca/commentary-no-dutch-treat-oil-and-gas-wealth-benefits-all-parts-of-canada/

 

In the Shadow of the Boom: How oil sands development is reshaping Canada’s economy,

press release and link to document is at:

http://www.pembina.org/media-release/2344

 

“Is Canada grappling with Dutch disease?” The Globe and Mail, May 16th:

http://www.theglobeandmail.com/report-on-business/economy/manufacturing/is-canada-grappling-with-dutch-disease/article2433816/

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