EH.Net Abstracts in Economic History

                ABSTRACTS IN ECONOMIC HISTORY
                    (c) 2000 EH.Net
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Name:  Stuart J. Wilson
Email:  wilsonst at qed.econ.queensu.edu
Institution:  Queen's University

Co-author:  none

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

Internet Address of abstracted work: not available

By mail:
Department of Economics
71 Folger St
Kingston, ON K7K5Y7
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." Working Paper. March 2000

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

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