Dutch Disease

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Dutch disease is a phenomenon that occurs when a country experiences a resource boom (Bimenyimana & Vallée, 2011). This may be due to a major discovery or to a significant increase in the price of the resource (Bimenyimana & Vallée, 2011). Thus, there is a high demand for the currency of the that country, which causes it to appreciate (Bimenyimana & Vallée, 2011). Subsequently, the manufacturing sector suffers a decline, both in output and employment, because the local manufacturers have a difficulty competing domestically and abroad (Bimenyimana & Vallée, 2011). It becomes a “disease” when the manufacturing sector is unable to rebound following the end of the resource boom (Beine, Bos, & Coulombe, 2012). This phenomenon was first observed in the Netherlands during the 1960s (Bimenyimana & Vallée, 2011).
The majority of Canada’s population is centralized in Ontario and Quebec (Brander, 2014). A large share of the economic activity in these two provinces is related to manufacturing (Brander, 2014). Meanwhile, western provinces are more closely connected to resource-based industries, such as mining, energy, and forestry (Brander, 2014). Provinces within Canada manage and tax their own natural resources (Boadway, Coulombe, & Tremblay, 2013). Thus, the geography of Canada combined with the jurisdiction for natural resources poses a problem when attempting to combat the Dutch disease (Bimenyimana & Vallée, 2011). The resource boom is affecting two different parts of Canada (Bimenyimana & Vallée, 2011). Western provinces, specifically Alberta, are benefiting from the resource boom in the oil and gas industry (Bimenyimana & Vallée, 2011). Meanwhile, provinces with large manufacturing sectors, particularly Ontario and Quebec...

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Bimenyimana, C., & Vallée, L. (2011). Curing the Dutch disease in Canada. Policy Options, 75-79. Retrieved from http://archive.irpp.org/po/archive/nov11/bimenyimana.pdf
Boadway, R., Coulombe, S., & Tremblay, J-F. (2013). Canadian policy prescriptions for Dutch disease. IRPP Insight, 3, 1-26. Retrieved from http://www.irpp.org/assets/research/competitiveness/policy-prescriptions-dutch-disease/Boadway-no3.pdf
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