Manufacturing in a Natural Resource Based Economy: Evidence from Canadian Plants
Department of Economics, OxCarre (Oxford Centre for the Analysis of Resource Rich Economies), OxCarre Research Paper 216
31 Pages Posted: 18 Apr 2019
Date Written: February 2019
This study investigates the effects of an oil boom on ﬁrms’ performance using data from the Canadian Annual Survey of Manufactures. We exploit the time variation of the booming natural resource sector activity in an oil-producing area with the location of manufacturing plants. We hypothesize that the effect of the booming sector on plants depends on their spatial proximity, which allows us to create an exogenous treatment variable. The outcome variables include plant-level wages, employment, sales, and exports. We ﬁnd that the effect of the booming sector on the incidence of exporting varies greatly by plant-level productivity. More productive plants become more likely to export relative to less productive plants. They can do so by paying a higher wage, while employment grows less than plants that serve only the domestic market. We ﬁnd that initial productivity and plants’ ability to export provides an important differentiation in average plants effects. In particular, while there is a great variety in the effect by sector, a clear linkage with the resource industry is not observed.
Suggested Citation: Suggested Citation