Resource curse and regional development : does dutch disease apply to local economies? : evidence from Canada

Abstract

Looking at 135 Canadian urban areas over a 35-year period (1971–2006), the paper examines the relationship between initial specialisation (using employment) in resource industries and various growth indicators via a mix of descriptive statistics and econometric modelling. The paper differentiates between two resources sectors: resource extraction (mining, logging, etc.); primary resource transformation (paper mills, foundries, smelters, etc.). The evidence for a “resource curse” is mixed. Resource transformation industries are found to be associated with slower population growth, also depressing growth in college-educated cohorts. However, no such relationship is found for resource extraction. We find no evidence for a durable Dutch Disease wage effect. Wages fluctuate in response to resource demand as do working-age populations. Many relationships hold only for the short run. In the end, we argue, the impact of resource specialisation depends on the particular resource and type of industry it spawns, as well as location. There is no generalisable resource curse, valid for all resources and all places.