AMER.GROWTH: Immigration and Capital Accumulation in Canada,

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                 ABSTRACTS IN ECONOMIC HISTORY
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Name: Stuart J. Wilson
Email: Stuart.Wilson@uregina.ca
Institution: University of Regina

Co-author: none

Title: Immigration and Capital Accumulation in Canada, 1870-1913

Internet Address of abstracted work: http://athena.cas.uregina.ca/wilsons/papers/

By mail:
Department of Economics
University of Regina
Regina, SK S4S 4A2
CANADA

Language: English

Abstract:
A dynamic general equilibrium model is constructed to examine the
impact of mass migration on capital accumulation in life-cycle
economies. The model economies are populated by agents of overlapping
generations with limited lifetimes, and are subjected to a migration
shock. The model is calibrated to match Canadian demographic
characteristics over 1861-1913. During this period, Canada shifted
from being a country of net emigration, to one of net immigration,
circa 1897, with the prospect of profitable farming in the Prairies.
The calibrated model is then used to examine the impact of this
demographic shift on the domestic savings rate and the foreign
capital inflow rate. Model results suggest that up to three-quarters
of the increase in the capital formation rate and the foreign capital
inflow rate, and all of the increase in the domestic savings rate, in
the Canadian economy over 1899-1911, can be attributed to the
dramatic inflow of migrants over this period.

The Canadian experience during the four decades leading up to WWI
consisted of two remarkably different periods, with 1897 as the
defining year of change. In the three decades following Confederation
in 1867, Canada was a net supplier of migrants with emigration rates
similar to those of Norway and the British Isles. During this period,
total real income growth averaged three percent per year, and capital
formation rates amounted to about fifteen percent of real GNP. After
1896, the Canadian economy was dramatically altered. Canada became a
net receiver of immigrants, and Canadian real output grew six percent
per year. Gross capital formation as a percentage of output grew
steadily from twelve percent in 1896 to thirty-three percent in 1913.
What role did immigration play in the development of the Canadian
economy and in the remarkable record of capital accumulation?

Econometric models have been used to study the massive reallocation
of labour that occurred during the age of mass migration, 1820-1913.
Labour force growth in the New World raised capital requirements and
pulled capital from the Old World, "although what role labor force
growth played in accounting for the massive capital flows to the New
World remains an open question," (Taylor and Williamson, 1994: 351).
The purpose of this paper is to isolate the effect of a migration
transition, holding technological progress constant, and examine the
implications of this change on capital accumulation. This paper
presents a dynamic (overlapping generations) general equilibrium
model that examines the impact of immigration on life-cycle
economies. The model is calibrated to the Canadian economic
environment in the years leading up to the Great War. Using census
statistics of population, and estimates of survival rates, fertility
rates, and immigrant flow data, the population process for Canada is
recreated for the 1861-1913 period. Model results suggest that up to
three-quarters of the increase in the capital formation rate and the
foreign capital inflow rate, and all of the increase in the domestic
savings rate, in the Canadian economy over 1899-1911, can be
attributed to the dramatic inflow of migrants over this period.

Bibliography: Wilson, Stuart J. "Immigration and Capital Accumulation
in Canada, 1870-1913." Paper presented at the Fourth World Congress
of Cliometrics, Montreal, Canada (July 2000).

Subject: D, J
Geographical Area: 7
Country/Region: CANADA
Time Period: 7,8

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