Working Papers

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Working or discussion papers circulated publicly or among a group of peers. Certain disciplines, for example, economics, issue working papers in series. (URI:


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    Testing Market Integration in the Canadian Softwood Lumber Markets
    J., Kee; Yu, W.; Robak, E. W.
    This paper investigates the empirical validity of market integration for the five softwood lumber markets in Canada. Atlantic, Quebec, Ontario, Prairie, and British Columbia (BC). The Augmented Dickey-Fuller (ADF) tests of monthly price series for the period 1987.10-1998:11 reveal strong evidence for the presence of a unit root in each series. Accordingly, the Johansen cointegration technique is used to test for the law of one price in the five regional markets. Results show that the law holds in the pair, three, four, and five markets, supporting the hypothesis of market integration.
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    Did the 1994/96 Employment Insurance Reforms Improve Labour Market Outcomes for Young People
    Audas, Rick; Murrell, David
    One of the goals of the Employment Insurance (El) changes during 1994/96 was to reduce the number of habitual, seasonal El users, and to re-channel such users into higher skilled, lower-unemployment occupations. The changes were expected to re-direct a large proportion of young people into more productive human capital acquisition and occupational-choice activity. This paper investigates, using a simple one-equation model, the factors associated with a polychotomous (multinomial) variable describing labour-market states for young people. The model uses year / province interaction variables to explain pre- and post-reform El policy changes, along with labour-market and socioeconomic control variables. This paper finds that labour market/human capital participation for young people improved steadily, from the 1980s through the late 1990s, for young people living as dependants within a family. But for young people living away from their parents, there was little long-run economic improvement. For this group, there is some evidence that the 1994/96 El reforms did play a small role in improving labour market / education outcomes.
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    Measures of Human Capital
    Ruggeri, Joe; He, Zhen
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    Regional Dimensions of Federal Income Tax Cuts
    Fougère, Maxime; Ruggeri, G. C.
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    Is the Low Savings Rate of Households Indicative of Households in Crisis?
    Myatt, Anthony; Murrell, David
    Analysts have pointed towards increasing household debt, increasing personal bankruptcies, and a declining household savings rate as indicators of a financial crisis in Canadian households. Our conclusion is that, at this point in time, none of these constitute clear evidence of a problem. In particular household debt is more than offset by increases in household financial assets, and the low savings rate is driven both by short run dynamics and increasing real net worth of households. The high level of bankruptcies could be driven by a liberalisation of bankruptcy laws (1992). We note, however, that real PDI per capita has declined since 1989. This may be producing signs of crisis elsewhere - perhaps in increased poverty rates, or increased inequality amongst households.
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    Human Capital and Convergence in Canada
    Ruggeri, Giuseppe; Huang, Haifang
    The BMS model predicts the same speed of convergence for human capital and output per effective labour. Coulombe and Tremblay (1999) applied the model to the Canadian provincial economies during the 1961-1996 period and found support to this prediction. This paper tests the convergence of human capital in Canada during the 1976-1 999 period following the same theoretical framework The results show no evidence of convergence on the favoured indicators. Moreover, the test on the relationship between the human capital indicator and the labour productivity indicator suggests persisting interprovincial differences in labour productivity that have not been reduced either by the relative accumulation of human capital or by exogenous factors operating through time.
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    The Equity Effects of Tax Reform in New Brunswick
    Ruggeri, Joe; Bourgeois, J. P.
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    Education Policies and Economic Growth
    Benos, Nikos
    This paper studies the general equilibrium implications of various types of education policy. In particular, we examine individual-specific vouchers (ISV), individual-specific transfers (1ST) and public investment on economy-wide human capital (GH). Individual-specific vouchers augment inherited private education spending, while individual-specific transfers are standard cash transfers, which increase private income. Public investment on economy-wide human capital provides economy-wide externalities to individual human capital accumulation. The context is an overlapping generations growth model with second-best policy. In particular, the government chooses its tax policy and the allocation of tax revenues among the three types of education policy, subject to the competitive decentralized equilibrium. Numerical simulations show that it is socially optimal to provide a large voucher on inherited individual education expenditures and spend heavily on economy-wide human capital accumulation. In addition, it is optimal to finance government spending by a low proportional tax on initial human capital and a high lump-sum tax.
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    Convergence in a Small Open Economy
    Ruggeri, Giuseppe; Yang, Fan
    This paper used data for the ten Canadian provinces to determine whether there was convergence of regional disparities during the 1961-99 period. The results show mixed evidence on convergence. There was convergence of nominal output, but no convergence of real output, per capita or per worker. During the 1984-99 period, there was no convergence of output, per capita or per worker, in nominal and in real terms. However, there was convergence of personal income per capita over the entire period and for the two sub-periods. Government transfers to persons increased the speed of convergence of personal income per capita.
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    Measures of Obesity for Canada and New Brunswick
    Edwards, Mike; Ruggeri, Joe; Yu, Weiqiu
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    Climate Change Plans for Canada: a Full Cost-Benefit Framework for Evaluating Options at the Provincial Level
    Lantz, Van; Murrell, David
    This paper examines the provincial economic impacts from implementing the Kyoto Protocol in Canada under two policy options currently being considered by the federal government: the Broad-as-Practical and Reference-Package options. Using information from federal documents and academic literature, we find that the federal forecasts of undiscounted GDP losses to provincial economies represent misleading indicators of true economic impacts. We suggest that a more accurate provincial impact analysis of GHG policy options would be based on a net present value framework that incorporates discounted costs and ancillary benefits over the time-frame of the program. Once these elements are accounted for, we find that most provinces would benefit under both policy options, and would prefer the Reference-Package. Specifically, the Reference-Package option reduces provincial burdens of achieving Canada's Kyoto commitment, and may do so at virtually no net efficiency cost relative to the Broad-as-Practical option. These findings emphasize the importance of incorporating both market and non-market values into the policy-making arena.
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    Inter-Temporal Tie-Ins: A Case for Tying Intellectual Property
    Law, Stephen, M.
    Hybrid licences tie trade secret rights (which have no fixed expiration) to related patent rights (which expire). Although level royalty hybrid licences, which charge a single royalty for both rights, have been prohibited, it can be shown that infinite-term licensing (ITL) for patent rights may be better than a limited-term patent, when returns to the licensor are fixed. This paper explains hybrid licensing as a means of privately implementing the efficient ITL outcome when returns to the licensor are constrained but not necessarily fixed, without requiring a change in the length of the patent term.
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    A Note on the Probability of Recessions: Can Statistics Cananada's Leading Index Predict as Well as MARS
    Sephton, Peter, S.
    In this note we estimate the probability of recession using the revised leading index published by Statistics Canada. The results are compared to probabilities derived from a new non-parametric regression routine. While the indexes provide similar information on the probability that the economy is currently in recession, the non-parametric approach appears to offer more reliable information. Two out-of-sample forecasting exercises demonstrate the potential benefits to the use of the multivariate adaptive regression spline model.
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    Student Fees, Subsidies and Enrolment in Canadian Universities, 1962-1995
    Dickson, Vaughan
    This paper examines how student fees, subsidies and enrolment have evolved in Canadian universities over the period 1962 to 1995. A model is developed, and tested with a panel data set often provinces, wherein student fees (subsidies) are the outcome of provincial governments balancing the interests of students and taxpayers. Among the conclusions are that student fees initially fall as student numbers increase but then rise, that tighter provincial fiscal environments increase fees, and that more pressure for K-12 education increases fees. We also find that enrolments are more sensitive to changes in student aid than to changes in tuition.
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    The Effect of the Harmonized Sales Tax on Consumer Prices and Spending in Atlantic Canada
    Murrell, D.; Yu, W.
    This paper examines the effect of the Harmonized Sales Tax (HST) on consumer prices and spending from April 1997 to March 1999. Using aggregate and disaggregate (eight-component) consumer price index (CPI) data for the three participating Atlantic Canada provinces and for Ontario (as the "control "province), we conduct counter-factual analysis and find that, ceteris paribus, consumer prices were lower in all three participating provinces during this period. We also find that political support for the HSTwas relatively stronger in Newfoundland, the province in which consumers have benefited the most from the HST.
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    A National Formulary for Canada
    Hollis, Aidan; Law, Stephen, M.
    This article analyzes the benefits and costs of replacing Canada's ten different provincial formularies with one single national formulary. The 2002 Romanow Commission on the Future of Health Care in Canada recommended that Canada should have a National Drug Agency which would maintain a national formulary, replacing the existing provincial formularies which balkanize drug markets across Canada. This recommendation has been in part incorporated into the "Common Drug Review" in which the provinces (excluding Québec) have agreed to undertake a single evaluation of all new drugs; provinces, however, retain their own formularies and decide which products to list. This balkanized approach to listing and insurance coverage of drugs substantially weakens the bargaining position of the provinces and leads to higher costs.