Internal Migration, Asymmetric Shocks, and Interprovincial Economic Adjustments in Canada

This article provides an empirical analysis of the role of labor mobility in the intranational (interprovincial) macroeconomic adjustment process in Canada. This analysis is based on a pooled time-series cross-section econometric setup of net migration flows across age groups between the ten Canadian provinces since 1977. The results indicate that interprovincial migration is driven by structural factors such as the long-run regional differential in unemployment rates, labor productivity, and the rural/urban differential structure of the provinces. Furthermore, it appears that interprovincial migration is not that sensitive to regional asymmetric shocks at the business cycle horizon. Finally, using a conditional convergence model of human capital, the author estimates that migration has a powerful effect on the redistribution of human capital across Canadian provinces. With the interprovincial migration process, human capital is redistributed from the more rural to the predominantly urban provinces and from the poor to the rich provinces.