Does Canada Have the Dutch Disease?

This paper evaluates the presence of Dutch Disease in the Canadian economy arising through shocks to oil prices. The analysis consists of two parts: a short-run analysis of employment changes through deindustrialization and a long-run analysis of the impact on manufacturing total factor productivity (TFP). We find that in the short run, Canada is experiencing deindustrialization that is due partly to Dutch Disease and partly to structural change, consistent across most developed OECD countries. The long-run analysis shows that natural resource shocks have a negative effect on manufacturing TFP in turn damaging the competitiveness of the manufacturing sector. Overall, Dutch Disease is a very complex issue that is closely related to structural change. As a result, recent trends in the Canadian economy cannot be entirely attributed to Dutch Disease. Instead, there is a combination of many factors