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11

ntre for
ource Studies

Queen's University
Kingston, Ontario

The Imp c
~he Mining
Indu tries
on
,
anadian
R. W. BOADWAY

J. M. TREDDENIC

Centre for Resource Studies
Queen's University
Kingston, Ontario

The Impact of the
Mining Industries
on the Canadian Economy
R. w. BOADWAY

HO

J. M. TREDDENICK

9506

C22

863

The National Impact of Mining Series

1 The Impact ofthe Mining Industries on the Canadian Economy.
R. W. Boadway andJ. M. Treddenick.
2 The Transportation Impact ofthe Canadian Mining Industry.
lain Wallace.

©

ISBN 0 88757 001 I
Centre for Resource Studies, 1977
Queen's University
Design Peter Dom
Price $3.00

Preface

In 1975, the Centre for Resource Studies commenced a multidisciplinary program of research on the general subject of The National 1m act oiMining, with
the objective of examining the nature and extent of the effects of the mining industry on the economy and other aspects of Canadian society. The work is
being carried out both at the Centre and by contracts with specialists at universities across Canada. The Impact of the Mining Industries on the Canadian
Economy is the first report to arise from this program. It will be followed by
reports on transportation impacts, health and safety of workers, employment
and wages, mineral trade, and related subjects.
The present study attempts to identify the effects of the mining industries
on the economy by examining how the economy would differ if mining did not
exist or alternatively, if mining and related industries were expanded. The authors construct a mathematical model of the economy and perform all the desired experiments on it, reasoning that the response of the model gives, within
limits, a representation of the behaviour of the economy. The model used also
permits conclusions to be drawn about the effects of taxes and tariffs on mining
and other industries.
It is the goal of the Centre to make the results of professional research on
mineral resource management issues available to policy makers and other interested groups, in a readily usable form. Thus, we are very pleased to present
such a report as the present; though the methodology is necessarily complex,
the authors provide a non-technical explanation of their work and findings for
the genera] reader. Those who are interested primarily in a broad und;erstanding
of the research and its application will find chapters I and 2 of particular interest. A complete description of the analysis is given in chapters 3 through 6,
while interested specialists will find fuli technical details in appendixes I and II.
Views expressed are those of the authors, and do not necessarily represent those
of the Centre for Resource Studies nor of its sponsoring organizations.
C. George Miller
Executive Director
Centre for Resource Studies

iii

Contents Preface / iii Foreword / ix Summary / x Resume / xii 1 The Nature of the Study / 1 Introduction / 1 An Overview of the Analysis /2 Some Limitations of the Analysis / 4 2 A Synopsis of the Results / 7 Introduction / 7 The Canadian Economy Without Mining Industries / 8 The Expansion of Mining and Processing Industries / 10 The Effects of the Tax and Tariff Structure / 12 Conclusions / 14 3 A Description of the Model / '.6 Introduction and Overview / 16 Production Functions / 18 Final Demand Functions / 19 Import Supply and Export Demand Functions / 19 The Computational Procedure / 20 The Experiments Undertaken / 23 The Choice of Data / 25 r\ ( 4 Measuring the Impact of the Mining Industries / 28 Introduction / 28 Effects to be Observed / 28 Mining Industries Absent: Capital Retai~ed / 31 Mining Industries 'Absent: Capital Removed / 44 The Effects on the Welfare Index / 51 5 The Effects of Expanding Mining and Processing Industries / 53 Introduction / 53 Expanding the Mining Industries / 55 Expanding Mineral Processing Industries / 60 Increasing Supplies of Labour and Capital / 63 v .

6 The Effects of the Canadian Tax and Tariff Structure on the Mining Industries / 67 Introduction / 67 Distortions due to Tariffs / 69 Distortions due to Commodity Taxes /73 Distortions due to Capital Taxes / 74 The Effects of Eliminating All Tax and Tariff Distortions / 76 Appendix I: The General Equilibrium Model / 79 Notation / 79 The Fixed Coefficient Version / 80 The Variable Coefficient Version / 84 The Welfare Change Measure /85 Walras' Law / 85 8 Classification of Output Changes Resulting from Expanding Mining Industries / 56 9 Classification of Output Changes Resulting from Expanding Processing Industries / 61 10 Output Changes Resulting from Eliminating Taxes and Tariffs / 70 11 Tax and Tariff Rates.Variable Coefficient Case / 101 Import Supply and Export Demand Functions / 101 Inter-Industry Wage Rate Differences / 102 Input-Output Coefficients / 103 The Authors / 116 The Centre for Resource Studies / 117 Tables 1 Industry Classification / 26 2 Selected Effects of Absence of the Mining Industries: Capital Retained / 32 3 Industries' Response to Absence of All Mining Industries: Capital Retained / 35 4 Relative Response to Absence of All Mining Industries: Capital Retained / 37 5 Classification of Output Changes Resulting from Absence of the Mining Industries: Capital Retained / 40 6 Selected Effects of Absence of the Mining Industries: Capital Removed / 45 7 Classification of Output Changes Resulting from Absence of the Mining Industries: Capital Removed / 46 vii vi . by Industry / 94 14 Cobb-Douglas Industry Production Function Parameters / 99 15 Input-Output Coefficients .1966/ 104 Appendix II: The Choice and Sources of Data / 87 Tariff and Tax Rates / 87 Factor Supplies / 88 Demand Parameters / 90 Production Functions .)3 Final Demands. by Industry / 91 . Exports and Imports.Fixed Coefficient Version / 97 Production Function Parameters . Final Demand Shares. by Industry / 89 12 Factor Use and Payments.

Our computations were carried out at the Computing Centre of the Royal Military College where we benefited greatly from the assistance of Mrs. A number of other individuals and organizations made possible the completion of this study. Miller. We are particularly grateful for the interest and encouragement of Dr. Treddenick Royal Military College of Canada IX . Mrs. His suggestions. Errors and shortcomings remain the responsibility of the authors. Elizabeth Allen. and incisive questions. The bulk of the data employed in our analysis was provided by the Structural Analysis Division of Statistics Canada. The study was also improved by the comments of two anonymous referees and by discussion with members of the Centre's advisory council during the annual meetings of 1975 and 1976. We want to express our thanks to the Centre's board of di-rector for choosing to support this work and for providing the opportunity to work with the staff of the Centre. Robin W. Boadway Queen's University John M. greatly benefited the final product. arising out of an extremely careful reading of our earlier draft.Foreword ~ This study was commissioned in 1975 as part of a larger project on The NationallmpacLof Mining being ~ by t e Centre for Resource Studies at Queen's University. Gerda Pennock patiently and efficiently typed and retyped the manuscripts. advice.

incomes. ital ~~lation. Virtually identical but opposite effects arise when the expansion of mining is contemplated. Within the limitations of the analysis. have profound but circuitous impacts. a number of significant indications emerged. This inhibiting effect was shared by most other primary industries and some manufacturing ones. for which they compete with other industries. Additional supplies of labour and capital would not favour mining particularly. For example. while the increases in many other industries would be less than before. a somewhat different picture emerges: the same supplier industries would be reduced. Similarly. are important. a systematic way. Then. The service industries were correspondingly favoured. caused by the test conditions. the effect of a change in the economy is deduced by experimenting with the model. The net economic impact will be a composite of aU these influences. At the same time. The results of the tests should be interpreted with caution because the behaviour of the model is affected by the many assumptions included in it. which apparently decreases it). some very subtle. The often-advocated expansion of secondary processing improves the general economic welfare slightly (except for the smelting and refining industry. If all or part of the mining capital had been lost.. the mining industri@s influence.the Canadian economy through such indirect means as forward and backward linkages and t!le induced effect of the re-spending of earnings. and through exchange rate fluctuations. would be smaller. Exchange rate fluctuations and changes in the relative abundance of labour and capital. One perhaps surprising result is that the 1966 package of taxes and tariffs discriminated strongly against the mining industries. by testing how the economy would appear if the industry were absent (i. The present study traces all these effects through the Canadian economy in . Interactive effects. they are not always those which would be predicted from a consideration of the direct and indirect impacts acting in isolation.Summary In addition to their direct economic contributions of employment. mainly suppliers to mining. however. These assumptions are all made explicit in the report. Using the methodology of a 'general equilibrium comparative statics' model.e. x xi I .3 percent. but all others would be larger. and they are those generally used in economic analyses of this type. cap. and by testing the effects of an expansion of the industry. the configuration and behaviour of the Canadian economy at some point in time (1966. the latest year for which data are available) are reproduced in considerable detail. and trade flows. Hence. The results of the experiments are sometimes suprising. The tax changes which have occurred since 1966 will do nothing to change the general nature of this observation. less obvious effects are produced through the industries' requirements of labour and capital. If the mining industries had not existed (provided their capital had been available for reallocation to other industries) a few industries. leading to a reduction in general economic welfare of up to 2. though the behaviour of the real economy cannot be reproduced or predicted exactly. the general economic welfare of Canadians would be virtually unchanged. the impact of the presence of an industry is assessed in two ways. the economic results of distortions introduced by the system of taxes and tariffs are deduced from the behaviour of the model when the distortions are removed. removed from the model). the indications are thought to be generally reliable.

se produisent lorsqu'on considere I'expansion de )'industrie miniere. (1966 est r annee la plus recente pour laquelle les donnees sont disponibles). conduisant a une diminution generale du bienetre economique pouvant aller jusqu'a 2.3 pour cent.:on tre explicite dans Ie rapport et eIles sont celles qui sont generalement utilisees dans ce genre d' analyse economique. d'accumulation de capital et de flux commerciaux. Si l'industrie miniere n' aurait pas existe (en supposant que Ie capital disponible eut ete alloue aux autres industries) quelques industries auraient connu moins d'essor. Ceci etait egalement Ie cas pour la plupart des autres industries primaires et pour quelques industries manufacturieres. De la meme fac. lis ne sont pas toujours ceux qui pourraient etre prevus si l'on tenait compte des effets directs et indirects pris isolement: leur interaction. Le developpement souvent preconise des industries secondaires de transformation ameliore legerement Ie bien-etre economique general (a I'exception des industries de Fonte et d'affinage des metaux qui apparemment Ie diminuent). et par r effet induit provenant de la reutilisation de leurs revenus. I'effet d' un changement dans r economie est deduit en experimentant avec Ie modele. L'utilisation de la methodologie d'un modele 'd'equilibre general de statique comparative' pennet de reproduire de fac. Par exemple.Resume Outre leurs contributions economiques directes en termes d' emplois. montre que r ensemble des mesures tarifaires et fiscales de 1966 etait tres discriminatoire vis-a-vis l'industrie miniere. bien que Ie comportement reel de I'economie ne puisse pas etre exactement reproduit ou prevu. peut-etre surprenant. Des effets presque identiques. De la. L'effet economique net est la resultante de toutes ces influences.:ons. en evaluant Ie comportement de r economie dans Ie cas ou r industrie est absente de r economie (ou retiree du modele) et en evaluant les effets resultants d'une expansion de r industrie.:on correspondante. XIII xii . est importante. r effet de la presence d'une industrie particuliere est mesure de deux fac.:on tres detaillee la configuration et Ie comportement de r economie canadienne a certains moments donnes dans Ie temps. Le secteur des services a ete favorise d' une fac. un certain nombre d'informations pertinentes ressortent. les industries minieres influencent r economie canadienne par divers moyens indirects tels que les rappol1s economiques en amont et en aval. mais toutes les autres industries en auraient profite et Ie bien-etre economique des canadiens serait. les resultats economiques des distorsions introduites par notre systeme de taxes et de tarifs sont deduits du comportement du modele lorsque ces distorsions retirees. les memes fournisseurs seraient affectes de la meme fac. a partir du modele on peut en general se fier aux resultats. Les resultats des simulations sont parfois surprenants. principalement celles responsables de l'approvisionnement des activites minieres. ont des effets profonds mais indirects. Les resultats de ce tests devraient etre interpretcs avec prudence parce que Ie comportement du modele peut etre affecte par les nombreuses hypotheses sous-jacentes. Un accroissement de la dotation en travail et en capital ne favoriserait pas particulierement l'industrie miniere. En meme temps. Une image differente se degage dans Ie cas ou Ie capital alloue a I'activite miniere serait en totalite ou en partie perdu. causes par les conditions de la simulation. Cette etude retrace de fa<. mais opposes. Les changements fiscaux intervenus depuis 1966 n'affecteront en rien Ie caractere de cette observation. inchange.:on tandis que la croissance de plusieurs autres industries serait moindre qu'auparavant. Les fluctuations du taux de change et les changements dans l' abondance rela- tive du travail et du capital. A rinterieur des limites de cette analyse.:on systematique taus ces effets sur I'economie canadienne. Par consequent. et par leur impact sur Ie taux de change. de revenus. parfois tres subtile. virtuellement. Un resultat. des effets moins evidents sont produits par leurs besoins en travail et en capital pour lesquels elles enll'ent en concurrence avec d'autres industries. Ces hypotheses sont toutefois presentees de fac.:on.

Mining constitutes a significant part of total Canadian economic activity and as such indirectly influences operations in other sectors through market mechanisms. The primary approach of the study is to evaluate the effects of mining on resource a1location l in the Canadian economy. and trade flows. though they are important and have comprised much of the basis of past discussion of the contribution of mineral resources to the economy. producing 'induced' effects. the mining industries contribute directly to incomes. thus influencing the level of activity in these 'backwardly-linked' industries. The overall economic impact of the operation of the mining industry (or any other industry) therefore includes many direct and indirect influences occurring simultaneously. of concern to policy makers. these would otherwise have to be imported or not used at all. The degree to which these minerals are further processed in Canada . the economic data I. shareholders. Mineral product outputs are provided for the use of other industries or consumers. they thus compete with other industries for their use. The export of mineral materials and the purchase of imported inputs influence Canada's balance of payments and the operation of the foreign exchange marke :Finally. these effects do not occur in isolation.is also. These indirect influences are many. yI ---/ . etc. Incomes are re-spent by employees.1. Most obviously. capital accumulation. employment. Mining industries. an effect exists which has not perhaps been adequately considered in the mineral policy debate: the mining industries consume certain quantities of the scarce primary inputs of labour and capital. Resource allocation refers to the allocation of labour and capital amongst industries and more generally includes the levels of output and uses of that output for all industries. This study presents one such framework.. We are using the term 'resources' in the economic sense of the primary resources (or factors of production) such as labour and capital rather than natural resources. purchase products from other industries for use in production processes. However. In addition.'forward linkages' . suppliers. In such a complex situation. like all others. a systematic way of tracing these effects through the economy is required if the contribution of mineral resources to national economic goals is to be realistically evaluated. The Nature of the Study Introduction The impact of the mining industries on the Canadian economy is felt in many ways.

2 3 . Rather we attempt to assess how the economy would have evolved had --mining not existed. the control general equilibrium is disturbed by changing one or more of the paranleters of the model. intensive methods of production than they otherwise would. chapters I and 2 provide a summary of the research for the general reader. Our computations will indicate which industries are most affected by the existence of the mining industry. Changes in the relative prices of labour and capital will affect the final prices of the various industry outputs differently. 'Some Factors Relating to the Attraction of Manufacturing Industries to the Province of Alberta'. one may determine the effects of the parameter change. and L. These include behavioural assumptions about consumers and producers. Two appendixes expand on the technical underpinnings of the model and the selection of data. Such studies. 2 In a comparative static analysis. we cannot observe the shock general equilibrium. There are many routes by which the impact of the mining industry is felt ~ by other sectors. ignore additional important influences that the mining industry has on other industries via the market mechanism.. and therefore are probably not very accurate indicators of the impact of large changes. called the shock general equilibrium. Resources now allocated to the mining indu try could have been devoted to other industry uses. The University of Alberta. Stahl.S.'A Study of the Resource Industries in the Canadian Economy'. 1974. This introductory chapter will be devoted to a brief summary of the nature of the model and the experiments undertaken. this higher rental-to-wage ratio will cause other industries to use more labour. The term 'market equilibrium' is used to refer to a situation in which demand equals supply in a particular market. Such an allocation is called the control general equilibrium where the term general equilibrium refers to the fact that demand equals supply in all markets. Mines and Resources. A full description of them is given in chapter 3. This shock solution will indicate how the market mechanism would allocate to other industries the resources thus released. The results obtained must therefore be regarded as speculative to some extent. Thus. In chapters 4. 5. 'The Mineral Industry and Economic Development" . industry output prices depend upon the prices of inputs.. if mining uses large amounts of capital (relative to labour) compared with other industries. Furthermore. For example. A specific model of the Canadian economy is constructed which will produce an allocation of resources identical to that of the real economy. the overall effect of the mining industry will be to cause the price of capital to rise relative to that of labour.. The chief drawback of comparative static analysis (as with most economic analysis) is that the changes undertaken are not performed under laboratory conditions. M. patterns of final demand 2. Institute for the Quantitative Analysis of Social and Economic Pol icy. yet. Chapter 3 outlines the model in its full detail. J. The mining industry bids for both labour and capital in competition with other industries. One shock general equilib- rium. is that equilibrium obtained when the mining industry (or some specific parts of the mining industry) is assumed not to exist or is 'shut down'. Working Paper 7301. Bucovetsky. By comparing the resource allocations of the two general equilibria. and 6 the experiments and their results are interpreted fully. With a limited amount of both labour and capital available the markets for these resources will adjust to give an equilibrium price of labour (wage rate) and price of capital (rental rate) which will ration out the available supplies of labour and capital to their best uses. 3.A.... University of Toronto. Whereas we observe the control general equilibrium in real life. Most studies to date have focused on the influence the mining industry has as a purchaser of inputs from other industries (backward linkages) .. The changes in resource allocation computed from shocking the general equilibrium will depend upon the assumptions underlying the construction of the model.. Those interested in the technical details will wish to read further.. An Overview of the Analysis ( f __" .used enable us to find how various tax and tariff measures (actual and hypothetical) influence both the mining industries and the economy as a whole. The most important of these other influences arises from the fact that the economy faces a constraint in primary resources or factors of production (unless there is widespread unemployment of both labour and capital). The following chapter gives a synopsis of the results. Department of Energy. It is important to state clearly that we are not contemplating the shutdown of the mining industry as a policy option. December. Studies of this nature include M. 1971. however. then. Input-output tables depict the flow of goods through all industries of the economy for any given year. The mechanics of the method is to find a new general equilibrium allocation of resources. -1-/ ~ of assessing the economic impact of mining is to use the model to learn how the Canadian economy would differ if the mining industry did not exist. (mimeo). The mining industry will influence the outputs of other industries both by making less of these resources available to them and by changing the relative prices at which labour and capital may be purchased. And when relative prices change. The methodology used is that known in the economics literature as general equilibrium comparative statics analysis. In turn. The economy is said to be in general equilibrium when all markets are in equilibrium simultaneously. 3 The input-output tables 4 provide an ideal tool for measuring such linkage eff~ One can easily trace out the effects of a change in the mining industry as it works its way through the input-output tables.W. thesis. and the amounts of resources available in the two situations. technological relationships in the economy.. and as a supplier of inputs for use in other industries (forward linkages). 4. they can lead to useful insights since the model to be used is based upon detailed data for the control general equilibrium of the Canadian economy. Wilson.

for th' produci change and induslry oulpUlS ar' affected. Some Limitations of the Analysis As mentioned above. The details of the model in which all of the above effects are incorporated will be left until chapter 3. each of which utilizes 4 labour. It should not be interpreted as indicating what the economy would look like after It was. .e. The shock equilibrium (i. In order to maintain equilibrium on the foreign exchange market. The nature of the resource constraint is one of the most difficult to formu~ late and justify. For example.lished ~hlch Just clears the market (makes supply equal demand). Furthermore the natural reso~rce in question is not mobile between industries in the same way t~at reproducible capital is. a IS In the flel 0 taxatIOn. The importance of this omission is still a matter of dispute amongst economists. d applIcable f . Our main experiments with the model are to shut down the mining industry as a whole and also to shut down individual subindustries within the mining sector one at a time (e. In any case the input-output data we are using do. we cannot observe how the economy will actually behave when we shock it. exceptIon . 'apital. 6 . we test the effect on the economy of inducing further processing of minerals in Canada rather than exporting them to be processed abroad. In broad spectrum 0 f years. many other things would have c. Industries which previously used domestically produced materials from the mining industry will now have to import their materials. we evaluate the effect of the existing (1966) set of taxes and tariffs on the mining and other industries by removing them and looking at the shock equilibrium. Although It IS co. coal mining. Firms maximize profits and consu~­ ers maximize well-being. During that adjustment time. In our computations we have assumed that changes in the exchange rate will act as the equilibrating device.hanged 111 addition to the changes due to the shock. . The results we obtain from the model will. the model is suited to a number of other experiments. not (and could not) distinguish between the return to capital and any rent to pnm~ry resources. The conceptual nature of the shock solution is that it indicates how the economy might have looked had the shock model of the economy existed now rather than the control rr:odel.d~aw1l1g no distinction between capital and land or natural resources. Finally. gold mining. . Since structural changes In the slowly to. Therefore. One final influence of the mining industry which is of obvious importance in the Canadian economy is that which operates via foreign trade.The model assumes that all primary factors of productIOn (labour and capital) are employed. Most of the ways we have abstracted are commonly used in the economics literature (and in the statistical data available). By allowing for only two primary factors of production we are. The models we are using are static. depend upon the assumptions we made as to how the economy operates. so the rental element may not be large. the shock solution must be viewed as a purely conceptual.gen~ral equilibrium depicting how the economy might have looked had certam thll1gs been different.. obtaIned . 1966)7 rather than at changes in the economy over time.. of course. On each market a price is estab. . I The term 'factors' refers to the primary resources (or factors of productIOn) labour and capIta.. Comparative static analySIS abstracts from time entirely by assuming everything instantaneously adjusts to the shock. we consider how additional capital or labour resources made available to the Canadian economy would be most efficiently allocated to different industries. because we are not working under laboratory conditions. influence the reader's interpretation of the results. are incorporated into our general equilibrium model in addition to the inter-industry linkages mentioned above.). since it ignores the fact that some of the return to 'capital' m the pnmary industries may represent a pure rent element. we are lookmg only at a general equilibrium in the economy at a point in time (in our case. It involves answering the question. The change in the exchange rate from shocking the system by shutting down the mining industry will indicate the overall impact of that industry on the balance of payments. therefore. the total Canadian economy is divided up into fifty-six industries. Labour and capital are homogeneous resources which may be used in any industry and which are mobil~ among industries . A/I of th '$ influences. operating via pri chang sand d p nding ultimately upon the resource constraints in the economy.nventional in the general equilibrium literature to do this it is no~ al~o~ether s~tlsfac­ tory. an d notJ'ustl966 . How much labour an~ capital resources would have been available had the shock assumptIOns been 111 ef5.~ This output i sold either for final use or for use 111 other industries. which major revisions have taken place since the year In questIon. to. All models of the economy are of necessity abstractions of the real world.g. The choice of 1966 as the year of interest is dictated by data limitations. These assumptions will. In addition. . whereas the exports of the mining industry will no longer exist nor will any imported inputs to the mining industry be required. 7. That IS the most recent year for which the requisite input-output data were available. An obvious. Additionally. shocked and enough time had elapsed so that all markets had come to eqUlhbrium. either the exchange rate must change or a change in capital inflows must Occur to offset the change in the trade balance. Some of the limiting assumptions of the analysis will be outlined here. 5 The fifty-six induslries are listed in table I. For example. That is. In this particular model. much of what is normally called rent may actually reflect a reward for exploration and development. be Iy develop economy o n . and int 'rm 'diate inpuls from other d mestic or foreign in~us­ trie t pr du e output.. we consider the qualitative results . if mining did not exist) will involve different amounts of both imports and exports. All sales and purchases of both goods and facto~6 take place on competitive markets. etc.

They also show the 'opportunity cost' of the existence of the mining industries. we obtain estimates of the extent to which the 1966 set of taxes and tariffs discriminated against mining vis-a-vis other industries. ii Expanding the industry's output incre~ntally. in the case of (iv). In the first. and product pnces would differ in the new circumstances. which actually did exist? Every industry's outputs. despite these limitations the results we obtain are qualitatively very significant. Details of the model and a full examination of the experiments themselves . the model is static and looks at the economy at only one point in time. i Eliminating the mining industry's production entirely (and assumlllg Imports fill any domestic requirements for the product). a third experiment was performed in which fifty percent of the capital was retained. iv Eliminating distortions caused by taxes and tariffs. but the capital used in the industry to be shut down was assumed not to be available for use elsewhere. are to be considered hypothetical exercises in the sense that the changes we compute are not those one would observe if they were to. . For the latter. given that much of the capital came from foreign sources. the aggregate supplies of both labour and capital were assumed to be the same in both the control and shock general equilibria. All of these findings are important to policy makers in laying out a strategy for mineral policy in the future. the influence of tax and tariff policy on mining industries vis-a-vis that on other industries.ture and limitations of the analysis. Our results indicate the effects on resource allocation of expansions of both the mining industries and the processing industries. To test this point. The purpose of the present chapter.and their results . However. therefore. iii Increasing the available supplies of primary resources (labour and capital) incrementally. Conceptually both could have been incorporated into the model but the data required to include these effects are not available. we have performed our computations under three alternate sets of assumptions. Chapter 3 contains a full discussion of the nature of the demand and production functions and the parameters chosen for them. equilibrium computed under the changed conditions indicates what the economy might have looked like now had the changes been in existence while the present economy was evolving. . For the former. A Synop Is of the Results Introduction The economic model used for all experiments has been briefly described. Any actual change would t~e time to work 6 7 . as would factor prices and exchange ~. if the shock general equilibrium involved operating without the mining industry.. How would resources be allocated 'in the economy had another set of circumstances existed rather than those. There are two reasons for this. the results of the experiments are speculative to the extent that we have had to choose parameters for our demand and production functions somewhat arbitrarily. The computations. inputs. The model ignores both interregional effects and income distribution effects of the mining industry. it is important to keep in mind the. a series of counterfactual experiments designed to answer the question.~ The changes in the system we have consIdered are th Jlowmg. - . Rather. na. the supply of labour was assumed fixed.are given in later chapters. an interregional input-output table would be required. is to present a synopsis or overview of the results for the general reader. we would require detailed factor ownership and expenditure data on industries by income group. They indicate the industries which benefit most from the existence of the mining industries. All computations use the general equllibnum mo~el to calculate how the economy would look if something in the system were dIfferent. The exercises we conducted are. would the ame amount of apital have been available for use elsewhere? it might not have been. in the sense that they show which industries would have acquired the resources now used in mining industries had the latter not existed.. In the second. Ea of these chanoes will he!. Finally. 2. Finally. In interpreting the results. however. take place in the real world.f 'ct rath 'r than th cll1lrol assumptions? f. First. sensitivity tests that we have performed indicate that the results are not overly sensitive to the parameters chosen. however. . . Nevertheless.' r example.p us to assess the im act of the mllllllg Illdustries in the Canadian econon"!y and. Since the truth probably lies somewhere between these two extremes.

The industries declining. but also include industries which rely heavily on imported inputs which become more expensive due to a rise in the price of foreign exchange. and Lime are absent does the wage-rental ratio fall. and with the passage of time many other things could occur. Overall. or combinations of the above. In all the experiments with mining absent. then the wage-rental ratio rises. Rubber. 2. The following sections summarize the results that have been obtained for the various experiments outlined above. the interest rate or return to capital. The 'wage-rental ratio' is described in chapter3. The relative impact of the various mining industries tended to depend upon their comparative sizes. mainly due to the absence of e~port sales from the missing mining industries. but some may be puzzled by the increase of other industries and by the particular patterns of increase and decrease. These results are directly attributable to the capital intensity of the industry removed.if not the exact quantitative results . Iron and Steel. The wage-rental ratio is greater when most mining industries or groups of mining industries are absent. and the relative availability of labour and capital. Utilities. Results are displayed in tables 2. The Canadian Economy without Mining Industries These experiments 3 were conducted to see how the economy would have evolved in the absence of mining industries individually and in groups. the exchange rate. capital-intensive input. A fall in the wage-rental ratio has the opposite effect. If the price of capital (broadly. For a full discussion of these experiments. Education. andRail Transport. 3. The 'welfare index' is a computed quantity which is a measure of the well-being of the people in the economy. The effects of Metal Mines tended to exceed those of Non-Metal Mines.its way through. in order of percentage decline. It is a convenient term which expresses the relative prices of the two primary resources. Most readers might expect declines in dependent industries when mining is absent. and the welfare index. Machinery. Hospitals. All other industries rose in output when the mining industries were absent .because all relationships in the model have been made to conform exactly to the real world at one point: the computed equilibrium for the control solution exactly represents the economy which was observed in 1966. The other reason why our computed changes might not agree with what would be observed is that we have had to hypothesize specific functional forms for the production and demand relations in the economy.and7. there is no way of knowing how accurate they are.as is Canada. 3. broadly. Aluminum Rolling and Extruding. This rise assists other export industries by making their products appear cheaper to foreigners and assists import-competing industries by making imports more expensive to Canadians. For example. Miscellaneous Manufacturing. Short-term disruptions could be severe. industries using I. these influences working through the exchange rate are the most important determinants of industry output changes in the majority of our experiments. the exchange rate. a few other industries suffer a decline in output. we have some confidence in the general qualitative thrust of the conclusions . In order of percentage changes those increasing most were Petroleum Refining. An increase in the wage-rental ratio will tend to favour capitalintensive industries and those using products of capital-intensive industries. the price of foreign exchange rose by about five percent. the wage-rental ratio I . Since this assumption is arguable. Construction. any reduction in the quantities of various goods available for final consumption is reflected in a lower welfare index. This effect is due to the low capital-labour ratios of these industries. These are mainly industries which are suppliers of inputs to the eliminated mining industries. However. industries using imports as inputs into their production processes are hurt by the higher price of imports.Coal. Within Metal Mines. On the other hand. and Metal Fabricating. the price of foreign exchange rose (that is the value of the Canadian dollar decreased). Only when Gold. Since the empirical evidence is scanty in this area.some much more than others. these tended to be primary industries and selected manufacturing industries.6. This might be expected in a country as dependent upon foreign trade particularly in minerals . 5. see chapter 4. When mining industries are absent. Those rising most tended to be industries producing tradeable commodities. Motor Vehicles. the experiments without the mining industries were repeated under the assumption that the capital used in the industry would not be available to move elsewhere. Base Metal Mines had the strongest effects. and to observe how the existing resources would have been reallocated as a result. its absence will induce a rise in the wage-rental ratio by making capital relatively less scarce compared to labour. As it turns out. were Services Incidental to Mining. The indirect effects of the absence of an industry are very important. If an industry has a capital-labour ratio higher than the national average (as have most mining sectors). and include changes in the export/import balance. labour and capital. 2 In addition we shall provide a brief description of the causal forces at work leading to these results. Petroleum and Gas Wells. When all mining industries were absent together. Only the labour released could be used elsewhere. 4. The outcomes of all of the shutdowns were amazingly similar. The main results of interest are the effects of the changes on the outputs of various industries. if some change in the economy is reflected in a tighter labour market. The experiments described above were performed assuming that the capital employed in mining would be allocated to other industries if mining were absent. capital-intensive industries. here called 'rental') stays constant. The exact definition is expressed mathematically in appendix I. and Health. the price of labour (wages) rises. In all cases the wage-rental ratio falls because of the labour re- 9 8 .

Hospitals. the tax and tariff structure discriminates heavily against processing industries. The latter does appear to be important in causing Petroleum and Gas Wells and Agriculture to rise by much less than before. as we find in chapter 6. Machinery. Other Petroleum and Coal Products. Food and Feed. Textiles. 10 resources with manufacturing and primary industries and not so much with service and other tertiary industries. The results obtained fell roughly midway between the above two extreme cases. Agriculture. anything which offsets this discrimination will tend to increase welfare. Both the wage-rental ratio and the price of foreign exchange fell in all cases except that of Gold. and Metal Fabricating. inducing an increase in import demand. There is no way of telling whether the latter effect (which is surprising) is due to the high aluminum content of Smelting and Refining. Results are displayed in table 8 and table 9. Rail Transport. Petroleum and Gas Wells. The changes in industry outputs were similar in the case of all mining industry increases. The expansion of all mineral processing industries had similar effects to those of expanding the mining industries. and Education. Agriculture. Owner-Occupied Housing. Construction. Motor Vehicles. and Clothing. as did the price of foreign exchange. The industries which decline were similar to those forced to contract when mining expanded.3 percent.Petroleum Refining and Food and Feed . These experiments. Those declining most were capital-intensive manufacturing and primary industries which are heavily involved in trade. Utilities. Industries which decline when mining industries and their capital are both absent follow the same pattern as when capital is allowed to reallocate. and Other Transport Equipment. Iron and Steel. and those using intermediate inputs. the change in the welfare index when mining industries are absent turns out to be relatively low. The wage-rental ratio fell (due to the capital intensity of processing industries). give us an indication of the relative importance of exchange rate changes as opposed to wage-rental changes. Leather. Those expanding were Services lncidental to Mining. and Gold fell by much lesser amounts. Therefore. Textiles. Some industries' outputs fall when II . the absence of all mining industries together leads to a welfare reduction of 2. Food and Feed. Leather. and Other Petroleum and Coal Products. Other Electrical Products. The exchange rate changes appear to be a much stronger factor than the wage-rental changes. those which are labour-intensive. The inaustries showing increased outputs tended to be those sell ing outputs to processing industries. the price of foreign exchange rose due to the increased total income in the economy.. Pipeline Transport. Petroleum Refining. and Health. Machinery. The most substantial increases in output occurred in Petroleum and Gas Wells. Coal output fell significantly. Industries which decl ined were primary industries and those manufacturing industries which are charac~rized by capital intensity and high trade con: ~. The same factor presumably would apply to any industry of comparable size. However. Metal Fabricating. the exchange rate unexpectedly falls despite the increased income and consequent expenditure on imports. the effects of increased labour and capital supplies have been computed. In no case where capital is retained does welfare fall by as much as one-tenth of one percent. For a full discussion of these experiments. ~ The Expansion of Mining and Processing Industries The effects of expanding individual mining and processing industries 4 were found by increasing the export demand for the industry's output and computing the resulting resource reallocation. Petroleum Refining. Leather.rise by much less than before. Motor Vehicles. The experiment was also performed of eliminating all mining industries and removing one half of this capital from the economy. Surprisingly. since these are very capital-intensive industries. The exchange rate usually rises. Those industries induced to expand by the processing expansion were Mining and industries earlier in the processing chain. and Clothing. and Clothing. Other Electrical Products. Apparently this is due to the fact that some import-substitute industries are strongly labour-intensive and benefit from the fall in the wage-rental ratio. Where capital is removed. The effects on industry outputs are remarkably similar to the case in which capital is allowed to move elsewhere. One reason for the favourable effect of expanding processing is that. The particular industries declining most when mining is expanded are (in order of magnitude) Metal Fabricating. The welfare index rises when all processing industries expand except Smelting and Refining. and Construction. Truck Transport. and Other Petroleum and Coal Products. In addition. Machinery. Increases in the capital available caused the wage-rental ratio to rise as expected. but by less than before (because the lower wage-rental ratio assists labour-intensive export and import-competing industries). Industries increasing the most in the absence of mining are Motor Vehicles. and Clothing. the absence of an industry does not have a disastrous effect due to the availability of import substitutes. Thus. In order of magnitude they were Leather. therefore. Smelting and Refining. and Petroleum Refining. Textiles. In the case of mining industry expansion the pattern of induced resource shifts was virtually the mirror image of the effects of eliminating the industries. When the labour supply is increased the wage-rental ratio falls for obvious reasons. In addition.Apparently the mining industries compete most strongly for the nation's 4. Some industries actually decline when the capital supply increases. industries that use these products . Textiles.leased. This happens because the Canadian economy is closely integrated with world trade. Petroleum and Gas Wells. see chapter 5. In two related experiments. No manufacturing industries expanded other than the processing ones. Transportation.

0. Smelting and Refining is strongly discriminated against by tarrffs. tarrff collections. Machinery.work to offset the tariff structure. Asbeslos. to the fact that this industry is a supplier of inputs to manufacturrng mdustrres which are favoured by tariffs. Thos induslries benefiting most from the labour increa e were Coal. tax payments of all kinds by corporations (mcludmg mmmg and logging taxes). 6. !Jase Mel. GYPSUIII. the tax/tariff structure hurts primary industries and most manufacturing ones. ~iscriminating against some industries and favouring others. are used to calculate average ~ariff rates on the products of each industry type imported. are used to calculate average tax rates on the gross return to capital (we will call this the capital tax rate). This indicates that export and import-competing industries tend to be discriminated against by the capital tax structure. Leather. When all tax and tariff distortions are removed. subdivided by industry.als. The price of foreign exchange falls. Similarly. The only industries strongly discriminated against by commodity taxes are those subject to excise taxes -Alcoholic Beverages. and Other Non-Metallic Mineral Products is hurt to a small degree. Smelting and Refining is favoured by removal of commodity taxes to a small extent. Electncal AppLtances. seven of the twelve mining industries increase slightly while the rest fall. Tobacco. nearly twice as much as it rises on removal of tariffs. 5. The same slight effect is felt on processing industries. due mainly to the assistance to exports from the rise 1Il prrc~ of foreIgn exchange. Textiles. The slructur of colI/lI/odity taxes appears to have only a sl ight effect on the mining industries. indicating that the taxes favour relatively labour-intensive industries. Since t~xes and tariffs fallon different industries at different rates..and most manufacturing industries as well. subdivided by industry. 7. The tariffs. Ili/ie!ille Tr{//Is/iol'/. Thus. Fmally. The output of all mining industries rises whe~ tarrffs are removed. The removal of capital taxes has somewhat more Qronounced effects on resource allocation than did the removal of commodity taxes. indicating a strong tendency for the taxes and tariffs to increase the returns to labour relative to capital. The wage-rental ratio falls by fifteen percent when these distortions are removed. see chapter 6. Finally. and Clothing. indicating that the tariff structure tends to favour relatlvel~ labour-intensive industries. This is probably accounted for by the fact that. the price of foreign exchange rises as expected and the wage-rental ratio falls. 7 Capital taxes discriminate against all processing industries fairly strongly . The effect of tarrffs on processing industries is mixed. See table II. the socalled deadweight loss expected to be imposed by these distortions appears to be entirely absent. Finally.especially later stage processing . For a full discussion of these experiments. whereas Metal Fabricating is strongly favoured. the taxes tend to offset the tarrffs In their effect. Surprisingly. When they are removed. The Effects of the Tax and Tariff Structure5 The data available for 1966 enabled us to calculate average tax and tariff rates on vanous transactions. expressed as a proportion of payments to capital. MIscellaneous Manufacturing. It should be borne in mind that total tax payments made out of corporate income are in question. the welfare index falls by less than one percent when all distortions are removed. as mentioned below. therefore. Presumably the latter effect Isdu~ partly.labour i1> expanu 'u PelroleulI/ aud (. and Other Petroleum and Coal Products. all three tend to dIstort the economy. the welfare index rises by one percent when these taxes are removed. with three favoured and three hurt. The welfare index actually falls by three-quarters of one percent when tariffs are removed. The wage-rental ratio falls when commodity tax distortions are removed. any change in taxes or tariffs will cause some industries to rise and others to fall so as just to employ all the resources available. 6 Tax payments on products going to intermediate and fmal uses are employed to calculate effective or average commodity tax rates on e. Overall. discriminate against mining Industrres. Because the total resources avarlable are fixed. and Motor Vehicles. suggesting that commodity taxes work against the protective effect of tariffs. All mining industries are discriminated against by capital taxes except Coal and Iron. This reflects the fact that the capital tax rates are higher than the national average in almost all the mining industries. Results of the experiments are displayed in table 10.ach o~ these transactions. The same is true of all processing industries except Metal Fabricating.1' Wells. Other Transport Equipment. When capital taxes are removed. the exchange rate falls by nearly ten percent.result from ehmmatmg each type of distortion individually (with the others left m) and then eliminating all tax-tariff distortions together. The capital taxes . 12 13 . all mining industries rise in output substantially. the price of foreign exchange falls by. This fact may surprise some readers. (lnd Olher NOli-Metal Milles. especially Coal and Other Non-Metal Mines.even more than the commodity taxes . In order to estimate how each type of distortion affects the allocation of gIven resources a~o~gst industries we have computed the general equilibria that . This is a measure of the deadweight loss of the commodity tax system. See appendix II for a detailed defin ition of the capital tax. The structure of taxes and tariffs existing in 1966 therefore strongly discriminated against mining industries. When tariffs are removed. The results of these various experiments are summarized in the following paragraphs. Apparently tariff policy is being completely frustrated by the more than offsetting effects of taxes.

Motor Vehicles. 2. and the Canadian dollar would fall in value by LIp to five percent. as the industries' operations influence the import/export balance. 15 14 . It will be useful at this stage to review the main indications which arise from this work. and Health. and Smelting and Refining. 5. Machinery. Textiles. and Clothing. Aluminum Rolling and Ext{uding. Hospitals. ii some industries would decline . iron and Steel. the present study shows that more subtle. wages. Motor Vehicles. or major segments of it. which favours the service industries. the price of foreign exchange.as expected . II II' iv changes in the general economic welfare of Canadians would be quite small (maximum reduction of 2. ]f the mining industries were incrementally expanded and the additional product exported: i some industries would expand . did not exist. and such public services as Education. Base Metals. If the Canadian mining industry.including: Services Incidental to Mining. Utilities. If. iii the general economic welfare of Canadians would be increased. and Miscellaneous Manufacturing (among others). In a complex system such as the Canadian economy. Miscellaneous Manufacturing.perhaps surprisingly . and Clothing. capita] investment. and availability of the scarce resources of labour and capital. and Petroleum and Gas Wells. especiaJly: Petroleum Refining. Leather. The implications of the experiments should be interpreted cautiously. 4. including: Leather.e. The Canadian tax and tariff structure leads to some distortions in the economy: i tariffs designed to favour manufacturing are more than offset by the tax structure. including: Mining. the results suggest that: i some industries would be smaller. Machinery. and Construction. Rubber. and other mining sectors. Rail and Truck Transport. Textiles. The observed effects are often surprising: they are not necessarily those which would be predicted from consideration of the direct contributions of the industry. as is widely advocated. the further processing of mineral materials were increased: i some industries would expand. and product output) and such indirect effects as forward and backward linkages. The impact of the mining industries on the economy is generally discussed in terms of their direct contribution (i. and Metal Fabricating. If more total labour and capital were available in the economy: i an increased labour supply would favour Coal. Machinery. Textiles. while causing a decline in Petroleum and related industries. Transportation. ii the combined effect is to discriminate strongly against mining industries and most resource processing. and Clothing. Utilities. and Construction. iron and Steel. ii other industries would decline. These are: Services incidental to Mining. iii replacing the present structure by a completely neutral tax and tariff system would remove the above distortions but the general economic welfare would be affected slightly. 1. yet very important. employment. in the light of the assumptions and limitations of the analysis. Construction. Machine/y.. 3.3 percent).Conclusions In this chapter we have summarized the experiments which are discussed more fully in later chapters of this report. effects arise. iii the Canadian dollar would increase in value. if at all. Most manufacturing is harmed to some extent. Motor Vehicles. (except in the case of Smelting and Refining) and the Canadian dollar would rise in value. ii all other industries would be larger. Rail Transport. iii export possibilities would be greatly reduced. 6. Leather. ii an increased supply of capital would have virtually the opposite effect.including: Metal Fabricating.

there is a balance-ofpayments accounting identity which states simply that the value of ~mports (net of tariffs) equals the value of exports plus capital inflows from foretgn sources. the reader is referred to Statistics Canada. We may deduce from the equality of row and column totals the fact that total payments for value added must equal total final demand (which is simply Gross National Product). .. 1961.imports + intermediate demands by Canadian industries. and (iii) the government which levies taxes and tariffs and uses the revenues to purchase goods for final use..1 X2. We proceed by aggregating all these final demands together for reasons given below. These accounting identities may all be represented in an input-output flow table shown schematically in figure I.. The output of firms may thus be used either for final demands l or for intermediate use by other firms. rent) and other value-added is defined to include government goods and services.. In addition.. The model is a fairly complicated mathematical one whose exact presentation requires some knowledge of calculus and linear algebra. and imports include tariffs)..2 X I. government expenditures...2 X 2. 0 56 *Xij is the flows of intermcdiatc products from industry i to industry j. for each industry: wages and salaries + surplus + other value-added + intermediate inputs from all industries (domestic and imported) = final demand by Canadians + exports .56 X2. 2 Note also that all the above values are gross of taxes (i . .. The economy consists of three sorts of decision makers: (i) consumers or households who own and sell the services of labour and capital (the so-called primary inputs) and use the proceeds to purchase outputs for final use (called final demands). (ii) producers or firms who produce outputs from purchased primary factors and intermediate goods produced by other firms. by dividing each element in an industry column by the corresponding column total..e.. intermediate demand includes intermediate taxes. Our task is twofold. The Input-Output Structure ofthe Canadian Economy. That is. First.. . Corresponding row and column totals must be the same.. Final demands are normally further classified as consumption. We shall endeavour to present a complete verbal description of the model in the text of this chapter for the non-technical reader..2 . indirect taxes (other than commodity taxes) less subsidies. and net income of unincorporated businesses. The sum of each column in this table equals total inputs into each industry and the sum of each row equals the total outputs. intermediate. The input-output table represents a snap-shot of the values of actual flows of production in the economy at a particular period in time. X 56 . The production sector of the economy consists of fifty-six industries. depreciation.. A Description of the Model Introduction and Overview In this chapter. . final I. we may obtain a column of input-output coefficients showing the values of each input required to produce a dollar's worth of output. Canadian residents engage in trade with the rest of the world.. Imports are purchased for use as either intermediate inputs by firms or for final demand. and exports are sold.. 16 17 . and taxes) equals the value of all outputs... .. S56 Other Value-AddedO I ° Total Inputs X I X 2 .3. 2. investment. The full details of the mathematical computations are presented as appendix I to this study. In addition. demand includes retail taxes.IX 56 . interest. Ottawa. capital and labour include income taxes. . a detailed description of the workings of the general equilibrium model will be given.. Surplus is defined to include all payments to capital (profits..56 X 56 . the accounting identity holds that the value of all inputs (primary. W 56 Surplus Sl Final Demand Exports Imports Total Outputs Ql Q2 EI E2 -M 1 -M 2 Xl X2 Q56 E 56 -M 56 X 56 S2' . In addition to the above accounting identity for each industry. . we wish to obtain a representation of the mechanical workings of the Figure 1: The Input-Output Table Interindustry Flows* Xu X I. For each industry.. 1969. X 56 2 . For an explanation of these categories in detail.56 Wages & Salaries WI W 2 . the details of which are given in table I and discussion thereon. and exports..

The wage rate is the average wage rate in the industry and the rental rate is the price of a unit of capital services or the gross profit or surplus per unit of capital. In one. the following propositions can be shown to hold if all firms minimize costs: 3 i The quantity of each intermediate input required per unit of output (the input-output coefficient) is fixed and independent of the level of output produced. and then explain how they are used to compute a general equilibrium corresponding to real world values. was chosen partly because of its simplicity. ii The quantity of each primary input required per unit of output (the 'unit coefficient') is a function of the wage-rental rati0 4 and is independent of the level of output. second. various capitallabour ratios). 5. The purchases of each industry's output should depend upon both income available and the price of the output. iii We have experimented with two different versions for the intermediate inputs. They can be substituted neither for each other nor for primary inputs. This type of demand function. with exports. 18 19 . partly because it has the desirable properties for demand functions. As the results we obtain are very insensitive to the choice of representation. The exchange rate which converts Canadian 3. if labour is expensive relative to capital. and partly because no other reliable empirical estimates of industry demand functions are available. The output price is simply the sum of the input prices times their respective coefficients. 4. 6. given a wage-rental ratio. The functional relationships to be explained include production functions relating inputs to outputs in each industry. tax and tariff revenues. Final Demands Functions The final demand functions show how the income generated by the economy as a whole (from payments to labour and capital. that is. we assume that all industries are perfectly competitive so all firms are price-takers. final demand functions. Because of the above properties. and the unit capital coefficient increases. To capture these two influences we have used a particularly simple functional form for final demand. commonly used in input-output studies and elsewhere. given the input-output coefficients for primary and intermediate inputs. we proceed by using the former or fixed-coefficient version for intermediate inputs. The exact functional forms we use are well-known in the economic literature: Cobb-Douglas and Constant Elasticity of Substitution (CES) production functions for primary inputs and Leontief for intermediate inputs. In the other. 5 This in turn implies that the proportion of income spent on each industry's output is constant (regardless of any price or income changes). we wish to perturb the economy and compute what the flows would have looked like had the perturbations been in effect. and export demand functions. Given the total outputs in each industry we can also determine total demands for each input. The combination of inputs actually used depends upon their relative prices (e. Production Functions An industry production function indicates the various combinations of primary Inputs (labour and capital) and intermediate inputs (purchased from other domestic industries and abroad) required to produce varying amounts of total output for that industry. Import Supply and Export Dcmand Functions The import supply and export demand functions show how the world price of imports 6 is related to the quantity of imports purchased by Canada and how the world price of each industry's exports is related to the quantity sold. In the case of imports.e. Furthermore. We shall first describe the various functional relationships that are assumed to exist.economy which will just yield the flow values that are actually observed. ii The two primary inputs are substitutable one for the other. the relationship is negative. and a rise in the price of a good (with income and all other prices fixed) would cause a proportionate fall in the demand for that commodity (the constant of proportionality in both cases being unity). Throughout the study. And. the world price is positively related to the amount bought. The production functions we use have several important properties: i They exhibit constant returns to scale (i. firms may choose amongst varying degrees of capital-intensity (i . This implies that a rise in income (with prices unchanged) would cause a proportional rise in the demand for each good. they will use capital-intensive techniques). firms will minimize costs by using techniques requiring comparatively large amounts of capital and small amounts of labour. import supply functions. one in which the income elasticities of demand are unity and the price elasticities of demand are minus unity. Therefore the increase is spent in the same proportions as income already is spent. they are assumed to be required in fixed proportions to produce outputs. they can be substituted both for one another and for primary inputs.e. a doubling of all inputs will double output). we can determine the primary and intermediate input-output coefficients for all industries. The unit labour coefficient decreases with the wage-rental ratio. The world price is the same as the Canadian price translated into the foreign currency price using the Canadian exchange rate. so. the price of a unit output may be determined once we know the price of all inputs. and capital inflows) are spent on each industry's output for final use.g. Therefore.

In addition. this model of the economy can be solved simultaneously for all market clearing prtces (output prices. Having done this. the unit labour and unit capital requirements may be computed from the production function. since no empirical estimates are available. What we assume is that the average wage in each industry bears a constant ratio to the average wage in the economy as a whole. final demand tax revenues equal the tax rates times the values of final demand. labour. Before proceeding. all prices are expressed relative to the numeraire. to do this requires solving a set of n unit pricing equations in terms of n + I variables. (Mathematically. From all these given unit input requirements we may deduce the price of a unit of output from knowledge of the wage-rental ratio alone.taxes and other value-added items. For example. One may think of the rental on capital as being unity for simplicity (since it is perfectly arbitrary).8 We shall use this wage rate to deduce what the aggregate demand for labour would be if all markets cleared and the balance of payments were satisfied. and net (financial) capital inflows from foreign sources. the reader IS referred to appendix 1. suppose we begin with an arbitrary wage rate (i . all the available primary resources are used up. The intuitive reason for this is that a doubling of all prices does not affect the allocation of resources (the system is said to be homogeneous of degree zero in all prices. They differ from the prices paid by final users by any commodity taxes imposed on the latter (e. The term wage rate in the text refers to the economy-wide average wage rate. we expcriment with various values for the import and export elasticities. different industries pay different average wage rates. taxes collected on intermediate demand equal the tax rates times the various categories of intermediate use.' In our computations. From the given wage rate. tariff revenues equal the tariff rates times the value of imports of each type. They of course bear the same relation to each other as absolute prices do. Net capital inflows from foreign sources are assumed to be given and not to change as the result of any of the changes we consider. it turns out that all prices and allocations depend directly or indirectly upon the wage-rental ratio. The wage rate would have to be iteratively changed until the equilibrium were established.into world prices is 'endogenously' determined (within the model). Next. wage rate. other value-added. The solution involves finding a set of prices and resour~e allocations such that all the above functional relations. The reason for doing this is to provide a convenient way to measure capital services as outlined in the next chapter. 7 Therefore. Only a basic outlineof the method of solution is given here. the market clearing conditions that must exist (demand equals supply for all products. There is no difficulty in allowing wage rates to differ over different industries. market clearing conditions. tariff revenues. Once again.) In our actual computations there are two additional problems to worry about . Total expenditures equals total income which may originate from any of the following sources . Ultimately. The total available labour and capital is known. A common analytical way to proceed is to select a particular price in terms of which all other prices are to be measured. The good or input whose price is thus chosen is called the 'numeraire. the prices received by producers ('supply' prices) are determined by the unit input requirements for any arbitrary initial wage rate chosen. and corporate tax collections equal the corporate tax rates times 7. The tariff and tax revenues and other value added are dependent upon the corresponding rates (which are known) and the transaction to which they apply. From the given wage and rental rates the payments to labour and capital may be determined.. etc.payments to labour and capital. all prices are measured relati ve to the rental of capital. for the n prices. the total amounts of labour and capital available. In fact. and exchange rate). We must include in the price determination process all taxes paid by producers on their inputs. the prices and the wage-rental rate. which must be determined. we know the unit output requirements of intermediate inputs. Therefore. If the aggregate demand for labour so determined were not equal to the given supply available. pricing equations. The import and export functions are assumed to be of the constant elasticity sort. rental rate. an expression for total final demand expenditures is derived. we must include the input-output coefficient for other value-added in the price determination equations. In addition. and the balance of payments requirements. This implies that the absolute price level is indeterminate. It is the exchange rate which just balances the balance of payments. it is the resource constraint the economy is working under. a general inflation raises the level of all prices proportionately but does not affect resource allocation). 20 21 . retail sales taxes. and capital). This is a straightforward matter. For a complete description. The Computational Procedure Given the above functions.g. there is an important technical point to be noted. and the balance of payments are satisfied and. from the inputlWtput coefficients. of course. 8. It is well-known in the economics literature that a general equilibrium in the economy which just clears all markets can only be solved for in terms of 'relative prices' (the price ratios of all pairs of goods) rather than in terms of absolute prices. the trick is to find the wage-rental ratio which just uses up society's resources.e. tax revenues.). then this could not be the equilibrium wage rate. we have selected capital services as the numeraire. To see how the general equilibrium solution is computed. wage-rental ratio). In the ensuing discussion. This is taken to reflect all non-pecuniary differences in working conditions in different industries.

This is known as Walras' Law and is well known to economists. an arbitrary exchange rate is chosen. The Experiments Undertaken The initial exogenous data used to compute the control general equilibrium are chosen so that the solution yields the same factor allocations. using the exchange rate. Therefore. Unfortunately. outputs. as 9. intermediate demands.eed expres~ions for imports: final demands. upon final demands. The reason for Ihis is Ihal we assume that the average personal income tax rale is identical for all industries. This is repeated iteratively until aggregate demand for labour approximately equals aggregate supply. Therefore. the entire expression may be solved for total income. Similarly. Once total income is known. together with total outputs by industry may be calculated from the market clearing conditions as explained above. The sum of these labour demands by industry would then represent the aggregate demand for labour by all industries when all commodity markets have cleared and the wage rate is the one which was originally arbitrarily chosen. such data are not available. are linear functions of total income. all final demands can be calculated from the final demand functions. At that point. Those experiments which involve changing the exogenous data include removing the various sorts of taxes and tariffs as well as changing the tariff structure. we iteratively compute the exchange rate which just satisfies the balance of payments (e. This procedure is repeated until the balance of payments comes close enough to clearing. Exports and imports are slightly more cumbersome to calculate.known once a wage ra~e has ~een stipulated. From this equilibrium exchange rate and the domestic prices and tariffs the quantities of all imports and exports are calculated from the import supply and export demand functions. imports depend upon the world pnce which may be converted. 10 From our computations we will know the general equilibrium values for all outputs.nts of all intermediate inputs (from the mput-output coefficients) and capital (given. the wage rate must be increased and the entire computation repeated. the capital market must also clear. The shock general equilibria arc obtained by changing either some of the exogenous data or the structure of the economy and recomputing the general equilibrium solution. one ought to be able to suggest whether various tax and tariff measures discriminate against.). If information were available which suggested that personal tax rates varied over industries. exports and imports.capital returns in each sector. Given the wage rate. the tax and tariff revenues depend ultimately . By the same token. we know the unit req~ireme. the wage rate chosen could not have been the equilibrium one. we could introduce it into the model in an analogous way to the corporate tax. If these unit input requirements are multiplied by total mdustry outputs. and the exchange rate. However. For this particular model it is proven in appendix I. the exchange rate must be that which just satisfies the balance of payments. the wage must be reduced. If aggregate demand exceeds aggregate supply. for eac. The choice of data is described in detail in appendix II. Notice that we are neglecting the personal income tax. inputs. 9 Therefore. Final demands can thus be wntten as a (lmear) function of mcomes. is derived by solving n simultaneous linear equations for the n industry outputs in terms'offinal demands plus exports less imports in each industry. prices. From the final demands. Intermediate demands and capital usages are both directly related to total industry outputs since. At this point we have an expression for total income involving several known values but including some terms involving final demands which. and hence all domestic prices. Therefore. and relative prices as in the actual Canadian economy of 1966 (the latest year for which input-output data are available).h industry. Since we know the tariff rates and we know the producer price (given the wage rate) imports and exports depend upon the exchange rate. This relationship is a standard one used in input-output analysis and. Using total industry outputs. it has no distorting effects on the economy and is of no consequence for resource allocauon In our model. as shown in appendix I. and capital usages In each Industry In order to complete the equation for total income. exports. and vice versa. by the market clearing relations for all commodities and the input-output relationship we shoW that total outputs depend linearly on all final demands plus exports minus imports. The prices are all . favour. Thus. we obtain total intermediate inputs and capital demands. The removal of a distortion caused by tax or tariff will cause resources to reallocate and industry outputs to change in such a way as to indicate how that government-induced distortion affects various industries. Exports sold depend upon domestic prices and the rate of exchange as outlined in a~ earlier section of this chapter. Our procedure is therefore as follows. the amount of labour demanded in each industry may be calculated using the unit labour requireents. the wage-rental rate). into domestic producer prices plus the tariff. Final demands for any industry's output depend upon total mcome and the price for that industry. and imports. When the wage rate has been found which clears the labour market. or are neutral towards the mining industry after all interrelationships in the economy have been taken into consideration. If this yields a balance of payments deficit as exports plus capital inflows fall short of imports the price of foreign exchange is increased. Furthermore. we n. Changes in the tariff structure are of interest since they may be utilized to encourage further 10. with excess supply.g. 22 explained above. 23 . If that labour demand does not equal the aggregate amount of labour available to the economy given 'exogenously' (from outside the model). a general equilibrium will have been reached.

Intuitively. transportation). the good becomes a 'non-competing' import. For example. The employment data give the quantity of labour (in manyears) employed by each industry in 1966. the differing working conditions of the two. All of these things are of interest in assessing the impact of the mining industry on the Canadian economy. which other industries are most dependent on this industry via backward linkages? These dependent industries will suffer a fall in output when this industry is absent. on the exchange rate. We will derive a method for measuring the change in well-being due to the change in final demands. The derivation of it is relegated to appendix I. however. These industries will find their output increased when the industry in question is absent. if any industry is removed.. as well as relative prices. of course. the payments by each industry for wages and salaries. the importance of various goods in the consumers' budget varies. In effect. The Choice of Data The basic data used in this study are the Canadian input-output tables for 1966. In all our experiments we compute the' welfare' changes from shocking the system. The input-output tables themselves include the volumes of all products produced by each industry which flows into other industries as intermediate inputs and to final demand. the general equilibrium model being used suggests a method for measuring the changes in well-being (or welfare or utility) in a shock general equilibrium compared with the control general equilibrium. in the real world. The employment data also give us a figure for the economy-wide total labour supply which acts as a constraint in the system as explained earlier. We have assumed in the demand func- 24 tions described earlier that these proportions are constant. all requirements for that Industry's output in final demand and intermediate use in other industries must come from imports. Though a higher wage payment in one industry rather than another may be ascribed to. Suppose we measure the importance of a good in the budget by the proportion of income devoted to it. Corresponding figures for capital employment by industry and for the entire economy come from the net-of-tax surplus payments in the input-output table. these different wage rates are also due to differences in average skills in different industries.g. This actually represents the dollar payment for capi- 25 . Analytically. . does not capture these skill differences perfectly. Wage rates will differ over industries and we assume that the proportional differences amongst industries are fixed. Statistics Canada has also made available to us data on employment and on taxes and tariffs. One other change of exogenous variable which may be of considerable interest is the effect of changing the supply of capital. Other industries are aggregated more highly because of the computational costs involved in solving a more complex general equilibrium system. We have obtained tables from the Structural Analysis Division of Statistics Canada using the fifty-six industry aggregation shown in table I. In our model. surplus. as our model and the data force us to do. The technical amendments to the above model are fairly straightforward. and on the volume of imports and exports. From these data we can compute input-output coefficients for all primary and intermediate inputs and the share of the final demand expenditure which is devoted to each industry's output. On the other hand. The shock general equilibria which are of the most interest to us. say. We might like to know where additional supplies of capital would be allocated as they become available to the Canadian economy. Finally. we will find out the impact that the industry had on relative prices (especially factor prices). These data are useful to us since they enable us to calculate the average wage in each industry from the total wage payments. and the flows of exports and imports of each industry's products. are those which involve structural changes in the Canadian economy without any data changes. The structural change involved is the 'closing-down' of a~ industry. some industries will have been hampered by the existence of the industry because the latter has drawn scarce resources which would otherwise have been used by the former. The removal of an industry from the model is a conceptual experiment whose object is to find out how that industry affects resource allocation in the economy as a whole. The shock equilibrium will involve a different bundle of final goods than will the control equilibrium because income. At the same time. Similar experiments might be performed for additions to the labour supply. processing. The effects of such encouragement will be considered. We postulate that the proportionate change in 'utility' in the economy is a weighted average of the proportionate change in final demands for goods where the weights are the shares of total final expenditure allocated to each good. It may be difficult to interpret these differences within a framework which assumes that labour is homogeneous and mobile. This particular aggregation was chosen in order to give as much detail as possible to the mining industry and to those closely related to mining (e. Treating labour as homogeneous and mobile. will have changed. the measure might be derived as follows.processing of minerals in Canada. Also. this change in utility or welfare has a sound theoretical base. In the shock equilibrium the final demands of various goods will have changed by varying proportions. The input-output matrix is reduced by one row and one column and the inputs of the non-competing import become a row vector of inputs treated in the same way as primary inputs. and other value-added. The well-being of the people in the economy is ultimately dependent upon the quantities of the various goods available for final use.

and provincial excise tax. In order that it does so. The juslil'i<:alion for usin· it as th' measure or capital services in physical terms is given in appendix II. o Z o II. In addition to explaining the choice of parameters.tal servi<: 'S ov 'I th Y ':II'. Commodity taxes include federal manufacturing sales lax. The data on tax and tariff payments provided by Statistics Canada were the total commodity taxes ll paid on all transactions and the total tariffs paid on all import purchases by industry. These are converted into rates by dividing the payment by the volume of the appropriate transaction. The Choice and Sources of Data. and import supply and export demand functions must all be chosen in an appropriate way. this appendix presents all the data used in the study. production functions. the parameters of final demand functions. Provincial relail sales taxes are excluded for lack of data but they are fairly uniform and not likely to introduce very large distortions. They were obtained from Corporate Financial Statistics /966 and were converted into 'capital tax rates' by dividing such tax payments by surplus in each industry. The data obtained for 1966 describe the flows to which the control general equilibrium must conform. As mentioned above. federal excise tax. These include both federal and provincial corporate income taxes as well as provincial mining and logging taxes. Z 26 27 . The choice of these parameters so that the use of the functions in the control general equilibrium calculation will exactly replicate the real world is a technical matter and is relegated to appendix II. These tax rates are all reported in detail in appendix II. the general equilibrium calculation is designed so as to reproduce exactly the observed 1966 Canadian economy. We also obtained taxes paid out of surplus by corporations.

The general equilibrium model outlined in chapter 3 is shocked by removing the mining industry and computing a new general equilibrium which just uses up the resources released by the absent industry (as well as by any other industry whose output consequently declines). the other where half the capital is retained. Finally. Since final demand depends upon relative prices. and the less they are used in industries whose outputs decline. both for individual mining industries and for selected groupings of these industries. its capital is totally eliminated (only its labour is released for use elsewhere). tradeables would be favoured and the price of foreign exchange would not rise as much as otherwise (or it may even fall). capita] will become relatively less scarce and labour more scarce in the rest of the economy.. If the industry is relatively capital-intensive so that the ratio of capital to labour it employs exceeds the national average. its absence will tend to increase the price of foreign currency in order to re-establish a balance of payments equilibrium. a 'true welfare index' is computed for each shock general equilib- 29 . are for the case in which all capital released could have been used elsewhere. Combined with the above influences. At the same time.4. the final demands for these products will fall and for others will rise. and in the greatest detail. We obviously have no way of knowing the extent to which the economy would have had less capital resources in the absence of the mining industries. Effects to be Observed Before discussing the results of the experiments. The price of foreign exchange will rise further than it otherwise would. The results given first. causing a change in total outputs in all industries. A rise in the price of foreign exchange per se will favour exporting industries (by making their prices appear lower to foreigners) and import-competing industries (by making imports more expensive for domestic residents). it is assumed that all the resources (both labour and capital) that are now used in the mining industries would have been available for use elsewhere had the industries not existed. the exchange rate. We known from chapter 3 that relative prices of the products of all industries depend ultimately upon the wage-rental ratio.e. The shock solutions will differ from the control solution in the way primary resources (labour and capital) are allocated. those that the industry supported via backward linkages). When an indus- 28 try is absent. If the industry in question is an export industry. On the other hand. In the example given here. if the exporting and import-competing industries tended to· be capital-intensive. Measuring the Impact of the Mining Industries Introduction The primary purpose of this study is to compute estimates of the effects of the mining industries on resource allocation in the Canadian economy. and the latter on the exchange rate. If these are labour-intensive. If the wage-rental ratio rises. products of industries which are labour-intensive. as intermediate inputs. Whether the wage-rental ratio rises or falls depends upon the relative amounts of capital and labour released by the absent industry. and it no longer provides any exports. The results of these experiments are reported later in this chapter. It may be argued that this is not entirely realistic. they will be more beneficially affected the more capital-intensive they are. the relative prices of all goods and factors. it releases labour and capital to the rest of the economy. the outputs of some industries will rise and others will fall. it is worth presenting an overview of the main sorts of effects to be observed. We have therefore experimented with two further cases: one at the other extreme. The wage-rental ratio will have to rise to induce employment of all the labour and capita] released. In the first experiments. These various influences will become important in trying to explain the results achieved below. the outputs and uses of each industry's product. and the welfare index. As mentioned earlier. outputs should tend to rise for other capital-intensive industries assisted by the rise in the wage-rental ratio. where if a mining industry is absent. the relative price will rise for industries which are labour-intensive or which use. The above events can be altered somewhat by changes brought about by movements in the price of foreign exchange. particularly in the case of the mining industries. Total outputs will also be affected by both the initial change in final demands and the changes in intermediate demands working via the input-output relationships. The movement of the wage-rental ratio may make this effect larger or smaller depending on the capital-intensity of exporting and import-competing industries. the rise in the wage-rental ratio will increase their relative prices and will cause a further reduction in exports and rise in import substitutes. The former has its primary effect in the wagerental ratio. the methodology used to approach this problem considers how the resources available to the economy would have been utilized had the mining industries not existed. outputs will fall for industries which previously sold a significant portion of their outputs to the one which is now absent (i. the more capital-intensive are their inputs. In the end. many of them were developed by foreign capital which might not have been forthcoming if the mining industries did not exist.

the welfare-reducing effects of the absence of an industry may be partially or even wholly offset by the induced reallocation of resources. The results obtained from the computations depend upon the parameter values used in the general equilibrium model. Therefore. 1953-54. and 25 have been used in various combinations. All other parameter values come from actual data on the Canadian economy as documented in input-output data obtained from Statistics Canada. Lipsey and K. The commodity taxes drive a wedge between the price purchasers pay and the price sellers receive on purchases of products for final and intermediate use. The elasticity of world demand for exports is unity for each industry and that of world supply of imports is ten for each industry. we experiment with all metal mining industries. The production functions are Cobb-Douglas in labour and capital and fixed coefficient in all intermediate inputs. 200-207. 5. 3. transactions with a high rate of tax will be discouraged compared with those having low rates of tax and the allocation of resources will be distorted. 'Price of Goods and Factors in General Equilibrium'. in addition. Those reported here use the following parameter values. Similar. When trade elasticities are very large. See H. 21. 785-97.C. Gypsum. We have found that. in our model wage rates differ over different industries as they do in the real world. The capital tax makes the rates of return to capital different in different industries thus distorting the allocation of capital. To the extent that this is true. we know that a small open economy (defined as one facing fixed world prices or infinite export and import elasticities) with more goods than factors is overdetermined. 'The General Theory of Second Best". I 1-32. Table 2 shows the proportionate change in the wage-rental ratio. pp. It is an application of what has been known in the literature as the theory of second best associated with the seminal article of R. RevielV o/Economics and Statistics. Our welfare index reflects only utility changes due to changes in the goods consumed. 3. only as many goods as factors will be produced. and. 1-20. 1971 . 1970. all non-metal mining industries. Finally. pp. 5 Mining Industries Absent: Capital Retained THE WAGE-RENTAL RATIO AND RELATIVE PRICES We begin by discussing the effects of the absence of the various mining industries on the wage-rental ratio and hence on relative prices. except when trade elasticities become very large. and the welfare index resulting from the absence of the mining industries. 3 I. Review 0/ Economic Studies. as explained in chapter 3. 2. welfare index. Coal. exchange rate. the wage-rental ratio rises when mining industries are absent in all cases but four . Journalo/Economic Literature. Labour and capital have been assumed to be combined using CES production functions estimated by Tsurumi with fixed intermediate coefficients. but less strong.rium solution. industries tend to be forced out of business when exogenous changes are to be made. vol. It may be maintained that the wage differentials are due to non-pecuniary disadvantages in the high wage industries. resources are reallocated elsewhere. several distortions exist. pp. 1956. The high wage is then a payment for the opportunity cost involved in working in unattractive jobs. The welfare index is constructed as the ratio of utility achieved in the shock equilibrium to that in the control equilibrium. IX. 4 And variable intermediate inputs have been allowed using the Cobb-Douglas form. However. Tsurumi. Those with high capital tax rates will likely have less capital than at the optimum and vice versa. Of course welfare could be raised even further by eliminating the distortions first hand. 'Nonlinear Two-Stage Least Squares Estimation of CES Production Functions Applied to the Canadian Manufacturing Industries. This is to be expected. too few resources are allocated to high wage industries. This welfare index. pp. World export and import elasticities of I. the wage differentials do not reflect distortions but proper prices reflecting true costs. In general. Harberger. 10. Canada is assumed to have more influence over export prices than import prices. That is. import-competing industries tend to have more resources than they might otherwise. in our general equilibrium model. 'Three Basic Postulates for Applied Welfare Economics: An Interpretive Essay'. no. Each mining industry is treated separately. the qualitative results do not change much. As this table indicates. and all mining industries. forces are at work when elasticities are large but not infinite. 52. vol. In a perfectly competitive economy with no price distortions of any kind. vol.Gold. Once again. and. vol. Samuelson. is a quantity index designed to give a monetary measure to the change in 'utility' as a result of the change in the bundle of final goods purchased when the system is shocked. This type of shift of resources partially 2 counters the welfare-reducing distortion and thus tends to increase welfare. the productivity of workers will differ over industries because of the different wage rates. Lancaster. At equilibrium.A. RevielV 0/ Economic Studies. we would always observe a fall in utility when an industry is eliminated. no. in particular. Thus. This ought to be borne In mind in interpreting the changes in welfare measured below. It does not include any changes in welfare due to labour reallocating amongst industries with different wage rates. It would profit the economy to move workers from low productivity (low wage) industries to high productivity (hig!l wage) industries but because of the imposed wage distortions the market will not do this. 1926-39. 24. the tariffs impose a wedge between the price producers receive and the price paid to foreigners for the purchase of the same product. From international trade theory. In some 4. and Lime. The main results reported in this chapter are the changes in wage-rental ratio. The best analytical explanation of this process may be found in A. Similarly. 1946-47'. 2. The true welfare index would be less than unity. exports loom much larger than do imports. I In the absence of an industry. the exchange rate. some resources may be induced to shift into industries previously discriminated against by the distortions. 31 30 . We have done some sensitivity analysis on the production functions and the world trade elasticities. Thus.G. This result is originally due to P. and outputs by industry which arise from the absence of various mining industries. The reason for this is that as a percentage of world markets.

19 0.00 0.00 0. the inter-industry relationships tend to buffer strong tendencies for the wage-rental ratio to rise when capital-intensive industries are absent.Table 2 Selected Effects ofAbsence ofthe Mining Industries: Capital Retained (percent changes) Industry Absent 4.04 cases. One indication that this latter may be the case is the observation that the smallest increase in the price of foreign exchange occurs in those industries in which the wage-rental ratio fell . Forestry. 10. For example. The economy-wide capitallabour ratio is 2. which are also quite capital-intensive industries.72 4.01 0.75. The industry absence which causes the largest increase in the wage-rental ratio is Base Metals. Base Metal and Other Metal Mines Uranium Mines Iron Mines Gold Mines Coal Mines Asbestos Mines Gypsum Mines Salt Mines Other Non-Metal Mines Quarries and Sandpits Cement Lime Metal mining industries Non-metal mining industries All mining industries Wage-Rental Ratio 2. The increase in the wage-rental ratio of 3. THE EXCHANGE RATE AND FOREIGN TRADE In all cases the price of foreign exchange rises (that is. There are many other influences at work besides the relative amounts of capital and labour released.03 -0.55 3. Therefore.43 0.13 0. a relatively small industry. The pattern of foreign trade changes is predictable from the change in exchange rate. The latter is only slightly larger than Base Metals in volume of total output yet its absence causes the wage-rental ratio to rise by 4. and Lime.65 percent is surprisingly small despite the apparent capital-intensity of the industries. The rise in the price of foreign exchange in all cases causes exports of all industries to rise and imports of all industries to fall. Once again.38 0.82 in the control solution. surprisingly. 14.11 0.58 0. the absence of Agriculture. causes the wage-rental ratio to rise by 3.03 0.05 0. 8. except for those of the industry in question. 7. Overall. the capital-labour ratio in the control general equilibrium is less than that for the entire economy.01 -0.06 0. This is partly accounted for by the higher capital-labour ratio in Petroleum and Gas Wells. INDUSTRY OUTPUTS The most interesting results are those obtained for the changes in industry outputs in the rest of the economy when mining industries are taken out of the model. 5. It is by far the largest of the mining industries. In this case the lower wage-rental ratio discriminates against the production of traded goods in Canada. Once again. this may be compared with the elimination of other nonmining industries.02 0. Forestry.00 0.12 0. Apparently. 13. Such an outcome is not unexpected.00 -0.02 0. the high wagerental ratio induced by the absence of most of the mining industries adds to this effect on the exchange rate to the extent that exports and import substitutes are relatively labour-intensive.65 Exchange Rate 2.37 0.04 -0. well above the national average. 36.02 0. The next greatest effect on the wage-rental ratio is due to Cement which is.01 0.32 0.Gold.13 0.45 percent. 6.48 0. which is significantly greater. Its capital-labour ratio is 4.43 0. The absence of an industry releases resources which may be used elsewhere and also reduces the demand for products of other industries used as intermediate inputs in that industry.15 -0. and Lime. II. given the large export content of most of these industries. 12. Thus there are forces at work tending to increase the output of some industries and reduce that of others. the reason for this is not hard to detect. although not the most capital intensive.4 percent. 37. the Canadian dollar declines) when the mining industries are absent.00 2. metals have a much stronger effect on the wage-rental ratio than do non-metals and account for the bulk of the effect of all mining industries. These results are not recorded here. In addition.01 -0. by the mechanism described above. Base Metals account for a substantial part of the rise.01 0. the absence of Petroleum and Gas Wells causes the price of foreign exchange to rise by about 3. the most capital-intensive.03 -0. The fact that the wage-rental ratio falls slightly may arise because the reduction in gypsum output causes a reduction in labour-intensive outputs via the input-output relationships.21 0. so one would expect its absence to cause a rise in the wage-rental ratio. the wage-rental ratio tends to fall since labour becomes relatively less scarce. It is.27 0. 4.01 3.04 0. Coal. The results confirm that relative prices tend to rise more in more labour-intensive commodities when the wage-rental ratio rises and in capital-intensive commodities when the wage-rental ratio falls.93 Welfare Index 0. In Gold.01 0.01 0. and Fishing. Relative prices depend ultimately on the wage-rental ratio. That of Agriculture.9 percent (more than all the metal industries combined). and Fishing causes the price of foreign exchange to rise even further.41 percent. Coal Gypsum. On the other hand. The case of Gypsum is more difficult. however.29 -0. It is instructive to compare the mining industries with Petroleum and Gas Wells. An interesting 32 33 .57 0.

-3538. -8228. We have already explained why these three characteristics are important in determining the influence on an industry's output. 753. I ~I 35 d. 1201. 187326. -151.0274 0. 50418. 373. Petroleum and Gas Wells (9). 381. 0. -590. 24838. Each industry is one or more of the following: highly capitalintensive. 247556. 4599. 0. 1023. -55012. 3918. -263. -6172. -49183. Industry Number I r ~! 1 Labour Demand (ManYears) Capital Demand ($ Thousand) 2 3 4 5 1368. -2597. 23135. %871. 5. Iron and Steel (25). 574. \ -309. Thus. 38046. -54616. Similarly. -923. 362. -3361. 788454. -11464.. -172300.0253 0. 1817.0493 0. -135.0246 0. 20094. -389506. In fact. Metal Fabricating ($249 million).LJr~ characteristic of the results obtained is the extent to which the various mining industries cause a similar pattern of industries to expand and contract. 0. -7589.0493 0.0124 0. -87975. -469. -2106. 45993. -93025. 106315. 0. exports. -9.0283 0. -301. 0. 6854. 16 17 18 19 20 3180. Other Electrical Products (35). -979. 38285. -28760. the outputs of several industries rise by more than $100 million when all mining is absent.0493 0.17480. 1805. -119443. Food and Feed (16). 16. These are the industries to which most resources would have been attracted from those released by mining. . -2803.0493 0. -345. 419. Motor Vehicles exhibits all three characteristics. -256. which accounts for the magnitude of its output change. -6333. capital-intensive industries will be favoured relative to labour-intensive ones. since the price of foreign exchange rises. -8911. 31824. 6973. or a user of inputs which display the previous two characteristics. 1676. 10758. -1450. 2580. 4031. -43691. . 116365.0272 0. -53025. 27251. 7963. 41982. Motor Vehicles (32). Pulp and Paper (23). Textiles. 1 -5054.s:. 2340. 9616. -4482.0493 0.0289 0. 36693. 0. -17. 216195. 1047. 9680. 0. -220206. 249449.0301 0. 26655.0266 0. It is interesting to note that apart from Agriculture (I) and Petroleum and Gas Wells (9) all of the strongly affected industries are in the manufacturing sector. 4993. for exampie. final demands. -18943. 710. -67357. -104.0188 0. -6323. -36630. -26144.0354 0.0493 0. and imports from the absence of all mining industries are reproduced in full detail in tables 3 and 4 which show absolute changes and percentage changes in these items respectively. -9030. 14. -8926. 25693.0493 0.0277 11666. Chemicals (41) and Miscellaneous Manufacturing (42). -1901. 1895 32598. 77686. -529. -124600. -302773. -330 -409. 5273. Conversely. 238.0493 -294535. -2885. -102900. 16403. -1257. They share several characteristics which account for this. 120517. -5857.0282 8245. -44. 7294. -2050. And any industry which uses these products as inputs will be favoured. Textiles and Clothing ($248 million). 5773. -27683. 3936. 94997. -6314. 2410. 551. -433780. 1735. 1624.0287 13664. -112874. -28192. -377 -2179 -30. and Leather. 6148. a producer of a tradeable commodity (export or import substitute). 37351. 44989 10789. It would seem that to some extent the mining and manufa. -3895. Each of the various industries tested will be discussed in turn beginning with all mining industries together and working through to each individual mining industry. 31 32 33 34 35 13743. 12941. -163105.0286 0. 175220. As table 3 indicates. Smelting and Refining (26).. -138858. -81642.0339 0. Leather.0386 0. 749. Table 3 34 L Industries' Response to Absence of all Mining Industries: Capital Retained (Absolute Changes) All Mining Industries Absent The effects on resource allocation. -972643. 36702.0493 37313. the output of all manufactunng-industries rises~ mining is absent.0229 00193 0.turing sectors compete strongly for the nation's resources. -2403. -38079 -27473 -5084. -14494. Machinery ($337 million). 8186.0290 0. 191476. The change is especially large in Motor Vehicles ($516 million). Machinery (31).. -304206. 12070. 303. -5068. 515620. 24053. -6505. -23996. 387. prices. 968. Our main interest lies in changes in industry output levels and we discuss in tum those industries which benefit from the absence of mining and those which are hurt. Becaus~ the absence of the mining industries raises the wage-rental ratio.0287 0. 1875. 130497. -39 2006. 21859. 208431. 7019.0272 11693. 27511. They include Agriculture (I). -72626.0493 0. 871. -3641. -69. -108809. one could say that these are the industries which are most adversely affected by the existence of the mining industries. 2485. 1193. -35585.0281 -8817. -138972 21 22 23 24 25 1739.0286 0. -24040. -19819. 7013. 23133. -6509. Metal Fabricating (30). and Clothing (20). 37180. 12 13 14 15 Final Demand ($ Thousand) Total Output ($ Thousand) Producer Prices Exports ($ Thousand) Imports ($ Thousand) 5031.0204 0. 16171. export and import-substitute industries are favoured. Manu actunng industries which r ~ '-. 26 27 28 29 30 1644. There are as well likely to be many other indirect influences at work operating via the input-output relationships which we are unable to discern clearly. 56330. 9609. 6 7 8 9 10 -10883. -25. -131369. -34289. 2657. 1549. -9706. 15552.

191476. 373. 776XC.0386 0. -35585. 4993.0281 -8817. 3:37480. I Labour Demand (ManYears) Capilal Demand Final Demand Total Outpul ($ ($ ($ Thousand) Thousand) Thow. 381.0301 0. 208431. 1201. 187326. -2803. 36702. -23996. -304206. 0.0493 0.0493 0. 37351. PeTroLeum and Gas Wells (9).. 1023. 15552. 24838.0493 37313. -17. -220206. 749. 20094. -26144. 12070. 419. 6854. 362. -55012. Thus. It is interesting to note that apart from AgriculTure (I) and PeTroleul1I alld Gas Wells (9) all of the strongly affected industries are in the manufacturing sector. PuLp and Paper (23). 31824. 2340.0493 0. -5068. 574.0272 11693. -112874. I I 5031. 6148. 10758. 36871. 116365. 16171. 238. 34 I 0 Table 3 IndusTries' Response To Absence ofa/l Mining IndusTries: CapiTal Retained (AbsoluTe Changes) All Mining IndusTries Absent The effects on resource allocation. 16. 45993. exports. -6323. -330. 3641. 1047. -3895.0124 0. 1817. -7589. -979. -309. 247556. -67357. -44.0289 0. 303.0253 0. 16403. -3538. Each of the various industries tested will be discussed in turn beginning with all mining industries together and working through to each individual mining industry. -2597. 9616. -433780.0283 0. 0. -102900. -131369. -5054. -39. -6314. Each industry is one or more of the following: highly capitalintensive.0193 0. the outputs of several industries rise by more than $100 million when all mining is absent. 0. -469.0493 -294535. 8186. -14494. -1257.and) 2 3 4 5 1368. 1875. -263.0204 0. 28760. -49183.0339 0. -256. -529. -93025. 4599. 6 7 8 9 10 -10883.0493 0. 3936. 249449. -104. /-172300 14. -2050. since the price of foreign exchange rises. -18943. 126 -25. 4031. 551. 27251. II 12 13 14 15 -590. MeTaL FabricaTing ($249 million). Chemicals (41) and Miscellaneous ManufaCTuring (42). 710. 387.0493 0. 1735. -1450.l characteristic of the results obtained is the extent to which the various mining industries cause a similar pattern of industries to expand and contract. Exporls Producer Prices Imports ($ ($ Thousand) Thousand) 0. 24053. -43691. . In fact.0286 0.0493 0. Conversely. 9680. -6505. -69. 0. 1624. 27511. and CLothing (20). -4482. 16 17 18 19 20 3180.4. 2485. -36630. 106315. -9. The change is especially large in MoTor Vehicles ($516 million). -8228. 5273. 1895. -9030. 1805. -151. -6509. -302773. 44989. 2580. -2106. capital-intensive industries will be favoured relative to labour-intensive ones. 12941. ~923. -2403.0493 0. -409. -135. 36693. 7%3. 130497. -108809. MeTal Fabricating (30). Manufacturing indu tries which 9 Industry Number I f . the output of all manufacturing industries rises when mining is absent. -27683. 26 27 28 29 30 1644.0272 0. It would seem that to some extent the mining and manufacturing sectors compete strongly for the nation's resources.0188 0. 37180. TextiLes.0277 11666. 7294. -54616. 10789 120517. Leather. 31 32 33 34 35 13743. 753.0493 0. There are as well likely to be many other indirect influences at work operating via the input-output relationships which we are unable to discern clearly. 0. -138972. SmeLting and Refining (26). -163105. 871. Machinery ($337 million).0274 0. and imports from the absence of all mining industries are reproduced in full detail in tables 3 and 4 which show absolute changes and percentage changes in these items respectively. These are the industries to which most resources would have been attracted from those released by mining. OTher EleCTrical ProducTs (35). 1549. prices. export and import-substitute industries are favoured. -34289. 968. 26655. 216195. Because the absence of the mining industries raises the wage-rental ratio. 38285. 2410. And any industry which uses these products as inputs will be favoured. 0. -6333. 1676.0287 0. Similarly.0282 8245. 2006. As table 3 indicates. -345. -3361.0266 0. -27473. and LeaTher. -2885. -6172. -72626. )-389506. MoTor Vehicles (32). -53025. -5857. 175220. -38079. ~28192. 5773. 23135. -81642. 788454. -1901. 25693.0246 0. 9609. which accounts for the magnitude of its output change. 94997. for exampIe. 32598. 119443. -9706. 3918. 50418. a producer of a tradeable commodity (export or import substitute). 7019. -11464. ~?72643. -377 -2179 -30. 7013. -8911. -301. 56330. -138858. (515620. final demands. We have already explained why these three characteristics are important in determining the influence on an industry's output. They share several characteristics which account for this. 23133. 41982..0354 0.. -8926. 2657. -24040. 21 22 23 24 25 1739. 21859. TextiLes and CLOThing ($248 million). They include AgriculTure (I). Machinery (31). 1193.0290 0. or a user of inputs which display the previous two characteristics.0287 13664. Iron and STeel (25). -19819. -5m. -87975. Our main interest lies in changes in industry output levels and we discuss in turn those industries which benefit from the absence of mining and those which are hurt. 6973. one could say that these are the industries which are most adversely affected by the existence of the mining industries. 38046. 5. Food and Feed (16).0286 0. MoTor Vehicles exhibits all three characteristics. -124600.0229 0.

00 5.37 19.43 -0.01 -18.63 5.0251 00232 0. ~here are relatively few industries which are made worse off by the absence of the mining industries.50 0.98 2.0278 ('' ' 0.66 2.0136 o.55 3.13 26 27 28 29 30 4.56 10.87 2.0291 0.0249 0. -1852.72 31 ) 18.04 2.89 2. -57. -5317 340.29 1.50 13.75 -18. -9. o.93 2. o.00 -100. 2712.37 -10000 -100.04 2.78 -1.89 6.30 -19. 1082.77 6 7 8 9 10 -100.95 -19. 161. -4937. -450.95 4.66 -100.19 -2. -471.24 4.64 -100. 51 52 53 54 55 -4326. Then further down.86 2.41 2.93 4. 11076.93 2.54 6.00 -100.00 -100.93 4.34 1.00 -100. o. 23914.37 -2. 11496.~le Table 4 3 (continued) Relative Response to Absence ofAll Mining Industries: Capital Retained (Percent Changes) Industry Number Labour Demand (ManYears) Capital Demand ($ Thousand) 36 37 38 39 40 -3992. Other Non-Metallic Mineral Products (38). -8859. -653.74 176 \ 3. 44326. 8297.05 -19.72 -2.00 2.00 17.0238 0.00 0.71 -100.51 2. 1082. 2594.15 0. 3837.29 6. O.37 -0. and Petroleum Refining (39).89 14. 2349. 15897. Motor Vehicles (32) (15. 7061.93 4.70 -17. -489. -453.-Petroleum Refining (392J21. Final Dcmand ($ Thousand) Producer Prices Exports ($ Thousand) Imports ($ Thousand) 0.00 3.37 1.29 -0.28 -2.87 2.89 5.39 .21 2.06 -100. in percentages the effect on these is much smaller due to their large absolute size. 834. 2753.42 2.46 2.93 1. o. 19599.64 7.96 -16.23 61948. O.48 2. However.02 8. -119614.00 -12.94 282 2.6 percent).89 0. 7680.69 11.00 -100.32 6. Insurance. 3625.89 8.20 10.92 12.00 -100. -237.09 -0. are slightly less affected than the ones above includ Other Transport Equipment (33). -371.0151 0.88 6.93 4.37 -2.00 214 -100.71 -100.00 -100.11 6. -2368. -1948.00 12. 23867.33 2. 506.10 10.09 1282 2. 3819. -14033.7 percent).00 16.21 7.82 -18.34 7.96 2.44 -25.92 -0.39 3. 40.57 11.54 3.0076 0.72 2.9 percent).44 -0.37 -2.37 4.48 -13.41 -0.00 -10000 -100.38 6.72 4.00 -100. I. 56666.93 4.86 2.0301 0.00 -25.00 -100.27 2.86 3.99 2.02 1.88 2.37 \ -100.80 15.00 -100.38 14.55 6.00 -22. 56 O. o.00 -2.51 9.09 -9. there is Furniture (21). Labour Demand Capital Demand Final Demand Produccr Prices Exports Imports 2 3 4 5 1.62 -18. -13741.55 -0.44 11.05 2.00 -100. 7675.93 2. The most obvious one is Services Incidental to :1'27 33 34 35 ~ 37 36 . 3747.89 507 1.48 1.0206 0. -330.71 9. 46 47 48 49 50 -900. -48290.01 2.37 -100.0264 11877. -52229.47 -100.07 1855 11.0493 0.00 -16. 185149.00 -2.31 -20.42 16 17 18 19 20 1.00 -0.00 -100.12.26 15. 22729.19 605.55 -0.06 -5. -15910.78 3.00 -100.64 93.18 -18.00 184.11 1399.52 -17. 33031.37 -106 -0. 1130.81 -100.73 3. 633. 122. -2193.18.6 percent) is the largest.97 11.85 7.97 2. 157251.18 8.93 -100. and Real Estate (53) and Wholesale and Retail Trade (51). 41 42 43 44 45 4483. 0.00 -100. -1045.00 1.01 2.93 19.31 -0. 56790.00 -2.87 2.93 4.53 2. Aluminum Rolling and Extruding (27) (14 percent). -49. 15466.57 2.00 -100.96 0.0271 0. Petroleum and Gas Wells (9) (16.48 -0.39 -0.2 percent).00 -100. -1545. -39618.71 5.0239 -6983.43 8.68 -30.82 2.24 9.51 6. 17493.37 -100.86 1. -53476.15 -(18. Some service industries are moderately strongly affected including Finance. -3321 0.94 21 22 23 24 25 1.41 -0.97 3498. 1021.81 -17. -3137.15 -24.02 _I L 12 13 14 15 -100. -1532.12 1.84 21.42 "-0. 4268.40 -100.01 7.37 Industry Number I o.81 456. Those most strongly affected in percentage terms are once again mainly manufacturing ind·ustries:. -876.69 .00 -0. 14537. -114699. -22. -5181.39 7. O.74 2. 2072.21 -0.90 -100. 108. 6853.0291 0.00 -100.0272 6220 -1653.39 2. O.36/ -1527 4.8 percent) and Rubber (19) (11.61 2.0493 0. 445. and Clothing (19). 0. 899. 5272. -40494.0273 7871. -57858. 144760.83 2.00 2.72 22. 1320 I.07 361. -13703.02 -0.00 -100. 243. followed by Machinery_(3U (l~percen0. 23582.02 -21. Textiles. Miscellaneous Manufacturing (42) (13. Iron and Steel (25) (12.37 -100.00 4.0062 0.77 1.59 -17.00 -2.00 -100. -3084.22 14. 488 564.90 2.69 8. ~56688. I 0. and Leather. -17090.

00 -100.03 0.38 -1. FinaJly. and Health (54).72 2.28 -0. For the purposes of comparison.91 1. and Education.93 2. especially those which are capital-intensive or highly tradeable or which are purchased from capital-intensive industries. and Miscellaneous Manufacturing (42) are all strongly increased when metal mines are absent.11 2.03 3. The rise in the price of foreign exchange is the main source of these changes.23 0.09 0.14 12.62 2.8) In this and the following cases we discuss mainly the effects on total outputs of each industry. Note that Services Incidental to Mining (15) also include services to Petroleum and Gas Wells (9). as expected.55 -0.53 1. The percentage decline in all imports is roughly the same for aJl industries (= 17 percent).91 -1. In the case of the former.07 0.00 2. but none of the remainder falls by as much as I percent.67 0. In addition. Services Incidental to Mining (15) falls by 15. industries are induced to reduce the\atio of their labour-to-capital use.04 0.45 -0.01 -0.47 2. we also experimented by removing Petroleum and G£ls Wells (9) and all manufacturing industries (other than processing) from the model. Metal Fabricating (30).00 0. Hospitals. hemicals (41). But because of the rise in the wage-rental ratio.00 -100. the pattern of industries affected was very similar to that of the mining industries.65 -0.06 -100.63 -1.19 0. Leather.05 1.36 0. As a result.28 18. 7.00 Mining (15) but others include Construction (43).94 4. Service and transport industries tended to decline.00 4.62 -2.on'in"d) Industry Number Labour Demand r Capital Demand Final Demand Total Output Producer Prices Exports Imports 4004.57 -0. and Other Transport Equipment (33).94 8. Smelting and Refining (26).67 3.33 -0.76 2.32 1.00 4.00 -19.00 -24.24 971.96 3.23 -29.83 2.64 0.49 0. In general.81 0. its fall would be closer to 100 percent.22 0.24 51 52 53 54 55 -0.08 2.92 0.37 16.3 percent and Utilities (50) by 1.01 -0.37 -2.79 3.14 0.37 2.00 -0.00 4. Similarly all exports increase by about 2-1/2 percent. there are a few cases in which industries use less labour and more capital to produce more output.00 0.06 2.00 2. mining.28 8.24 46 47 48 49 50 -1. Table 5 summarizes the main changes in total outputs occurring for all the experiments conducted. Petroleum and Gas Wells (9). Pulp and Paper (23) and Smelting and Refining (26) are increased slightly less. Utilities (50). metal mines appear to compete for resources most strongly with manufacturing industries and primary industries.00 2.~bl' 4 (. Hospitals. Metal Mining Industries Absent (4.00 -0.77 -22. In percentage terms. the changes in labour and capital usage for the most part follow the changes in total output.38 2.07 -0. All manufacturing industries find their outputs increased substantially when metal mining industries are 38 39 .45 0. and Health (54). Rail Transport (45). This tends to corroborate the result that manufacturing. Tables 3 and 4 indicate that. (Industry numbers refer to those listed in table 1).93 2.16 0.82 -19. The overall results in all cases are so similar that further elaboration of other effects is unnecessary.40 2. Copper and Alloy Rolling (28).15 -19.64 2.16 -21. Food and Feed (16).26 1.32 2.51 2. 6.51 2.55 4.26 -1.44 -0.90 4.00 1. Metal Fabricating (30).73 3.00 9.00 -100.32 -3. and Clothing (20).43 0.00 -1870 -19. Aluminum Rolling and Extruding (27).06 21.26 0. Textiles. all mining and processing industries were strongly favoured except for Metal Fabricating (30) and Other Non-Metallic Mineral Products (38). relative price changes are not very pronounced.07 13.89 -100. otherwise. This reflects the fact that more capital relative to labour is released to the economy compared to the ex isting capital-labour ratio in the rest of the economy. In addition.18 -21.27 0. 5.67 1.09 2.59 1. Each row of this table classifies industries by the magnitude of their total output changes resulting from the absence of individual mining industries or groupings of mining industries. Agriculture (I). aJl imports decline and all nonmineral exports rise.01 2.49 4.93 4. With the manufacturing industries absent. Agriculture (I). However.26 8. Motor Vehicles (32).71 0.48 41 42 43 44 45 6. mines is very similar to the case discussed above except that the magnitudes are slightly less. all of which are important suppliers to the mining industries.39 -100.99 -1767 -28.29 10. Other Electrical Products (35).38 -0.02 2.55 3.1 percent.82 -0.20 1.71 2. the rise in the wage-rental ratio will discriminate against those of the above industries which are highly labourintensive such as Construction (43) and Education.78 2.37 -0.07 0.36 2. Motor Vehicles (32) and Chemicals (41) were all increased strongly while Services Incidental 10 Mining (15) and Construction (43) were reduced.70 2.00 6.26 -20.91 2. Machinery (31).15 -0. Iron and Steel (25).00 -0.12 1.52 0.74 36 37 38 39 40 -100.17 56 0.28 2.00 -34.06 2.00 -100. Machinery (31).24 -1. and petroleum compete heavily for the same resources.49 2.35 23. The pattern of changes in industry outputs from the absence of metal.94 2.12 6.45 1. Iron and Steel (25). these tables show that the greatest price rises occur in Smelting and Refining (26).

45.19.33-4 7.49.43.22. 41-2 4.35.31.38-9.41-3.44 Table 5 (continued) Industries whose Omput decreased by: ($ Thousand) Industries Whose Output Expanded by: ($ Thousand) Absent Industry 5.28.56 1. 38-40.40.23.40.5. 35.000-10. 8.20.28.41.50.51. 22.7-9.18.44-9.25-6.31 6.46.41 25.29. Uranium Mines 6.18.12. 30-2.30-2 12.16.54 23.9. 33-4.12.40 3.4.17.7.38-9.35 13.000 35.19. 14.23.50.46-9. 33-42.55 2.25.16.18.43.17-8. 13.6. 55-6 3. Uranium Mines 13.54 15.42.24.3.49.39.11. 35. 24.9.36.25.27-8.41 25.52.000 0-1. 17-8.55 8.26.17.000 1.10-4.20.16.000 23. 52.53.56 15.54 39.45.53 29 3.21-9.30-1.10.30 9.44.000 1.24.000100.35.29.41-2 2.19.16.16-9.47 8.25. Gold Mines 2.45.29.52.16.000 15.33.52.33. 25-6.40.7.41-2 1.22.9.50 15.36. 25-6.4.38.53.9.55 14.28.46.14.000 20.38-9.44.23.000 37 2.51-3.5.7.9.26.27-9.52 45 50.40 4.45.24. 36.55 16.30 53 33.28.53.17.16.19.30.00060.51-5 2. 37.56 4.00015.10-2.21-2.40.16.27.51-2 More than 1.44.000 4. I0-5.38-9.8.10-2. 51.39.26.49 37 43-6.33.54 3.52.27-9.16.42.48.44.47 1.37.24.35.37.51. 36-7.41 40.22.17.6.10. 34.6.35 32 1.21. 36.000 23.29. 50-1.56 54 15.34.54 15.34. Gold Mines Coal Mines Asbestos Mines Gypsum Mines Salt Mines Other Non-Metal Mines Quarries and Sandpits Cement Lime Metal Mining Industries Non-Metal Mining Industries All Mining Industries ~ More than 100.11-2.27.17-8.20.39.52 1. Iron Mines 2.50.14.12-14.24.000 60.51-2 20. 21-2.27.48. Other Non-Metal Mines 1.22.36.53 1I.14.48.51 19.23-4.43.26.30-1.43-4.27-9. Iron Mines 7.38. 38.23-4.55-6 2-8.17-9.35.13. 10.30. 56 . 29. Quarries and Sandpits 0-1.39 19. 35. 36. 50 1. 34.42.2.35.32 80. Asbestos Mines 4.9.19. 14.9.34.33-4.48. 46-9.41-2 15.20.20.000 16.19.54 15.41-2 13.30-1 20.55-6 2.5-7.25.21. 24.26 53 32 32 33.7.51. 41-2 32 4.13-5.10-1.21.18.21.45-8.21.19.20.25-6.55 1-10.20.20. 27.7.13.19. 27-9.47.36-7.4.30-1 31-2 25-6.39.41.24.00020.18. Base Metal and Other Metal Mines 5.7.9.47.54 3.51.33.46.23. I I.47.3.27.38. Salt Mines 32 1.21.16.~ 0 Table 5 Classification oJ Output Changes Resulting From Absence oJ the Mining Industries: Capital Retained Industries Whose Output Expanded by: ($ Thousand) Absent Industry 4.4.40.9.24.33 23.30 32 32 31-2 1.53.55 6.13-4.10-2.53-6 15.45-9 3.21-2.43-5.49 31 1.53.30-2.9.43.20.27-8.37.00040.36-7.17.20.9. 50.33-4.34.22.16.35 5.26.47.49 29.25-6. 42.17.35.7.000-5.5. Coal Mines 10.55 25-6.43-4.23 32 38 20.8.21.46-50 5. Gypsum Mines 2.38.22.30.23.20.51-3.8.16.36. Base Metal and Other Metal Mines 5.6.56 50.11.43.38. 41-2 10.17. 33-4.37.8.49 31 1.13.56 32 1. 28.44. 49.21. 12. 40.30.00080.

and Petroleum and Gas Wells (9). Chemicals (41). V. '<T'<i. They include Services Incidental to Mining (15). Leather.. Smelting and Refining (26). Construction (43). all industries which are either customers of or suppliers to metal mines. 11. and transportation is not very strongly affected (it having a strong forward linkage to mining). Consistently the same industries tend to be strongly favoured and discriminated against. or are users of imports. As with the previous cases. Leather. and Other Elec- 43 . followed by Machinery (31).. or are labourintensive. and Clothing (20). '<T'<T ~ N . and Health (54). Hospitals. 0trj .<::: f-o ~ 0' '<i. At the next level. Other Electrical Products (35). Motor Vehicles (32) is consistently the most strongly favoured industry when individual mining industries are absent..q- ~ '<:'f" tr'j -r: -T In I. Utilities (50). Construction (43). Food and Feed (16). As with mining as a whole. Rail Transport (45). and Metal Fabricating (30). The illlPlll'l 011 olhcr minin ' indu~tries is nol substantial compared with that in manuf'u<:turing industries. The single industry which is most strongly increased is once again Motor Vehicles (32). and then Iron and Steel (25). "0 c:: ~ ::l o . and Education. is due to the smaller magnitude of these industries. Agriculture (l). Textiles. The 'Dummy industry' (56) also declines. 'r) ('f") ('f") l"") .s . Smelting and Refining (26). These are industries backwardly linked to non-metal mining or very labour-intensive. Lime (37) also is reduced when metal mines are absent. and Miscellaneous Manufacturing (42).~ ::l OJ "0 V> . 14) . the absence of metal mining industries tends to cause reductions in the outputs of Services Incidental to Mining (15). all other mining industries rise. Utilities (50). and Clothing (20).s c OJ . Education. 0' 'I"l rr: f'!ob O\~ ~ '<T 0 r-r"'l!J'1C: '" 'I"l \0 0\ V"l N ~c-r:--:tA r r-- ~~O\O> NNVN '<T 00\Ci '<T'" ~~ ~~ N oo o~ - N 8o o I o 8 '1) Individual Mining Industries Absent ~ ::l "0 V> . This..r.. probably due to its relative labour-intensiveness. The industries which suffer as a result of the decline in non-metal mining are familiar as well. Petroleum and Gas Wells (9).I 00 . Moderately strongly favoured industries include Food and Feed (16).5 . 13. as compared with metals. moderately strongly increased industries include Agriculture (I). 12. These are the identical industries most strongly increased by the absence of metals and for much the same reasons. Machinery (31) and Metal Fabricating (30) are almost as strongly favoured. and Health (54). Non-Metal Mines Absent (10. Chemicals (41). of course. Textiles.) 0 v) - tf) - - \0 0 '" 'I"l 'N" 00 • • 'I"l I o not present. followed by Iron and Steel (25). aJl manufacturing industries rise. Hospitals.I ci 'n 'r: \0 ~ v.D -< C OJ E OJ u OJ .::c:: ~ ~ 42 This pattern of similarity of effects is surprisingly borne out when we look at the absence of each separate mining industry.~). 0' 00 ' " The absence of the non-metal mines has once again a similar but much less pronounced effect. Miscellaneous Manufacturing (42). They are either capital intensive (in which case the fall in the wagerental ratio favours them) or highly tradeable (in which case the rise in the price of foreign exchange favours them) or they use as inputs products of industries having high capital intensities.

\': (I'('/'cellt Challges) Industry Absent Exchange Rate Welfare Index 4. it tends to fall here. Virtually thc samc industrics m'c alTectcd beneficially in every case. Lime Metal Mining Industries Non-Metal Mining Industries All Mining Industries -0.03 -0.02 -0.trical Products (35). the exchange rate.04 -0.00 0. reflecting the fact that the mining industries have substantially identical impacts on the economy except for magnitude. the wage-rental ratio falls in each case because of the direct release of labour. treating supplies of labour and capital as fixed may not be considered very realistic.01 -0. the price of foreign exchange rises.13 1.01 0.01 0. Gypsum (I I). Base Metal & Other Metal Mines 5. The changes in industry outputs occuming offer a useful comparison with the cases in which the capital of missing industries is retained for redistribution within the economy. and Health.22 -0. If Canadian import~ wmpeting and/or export industries tend to be labour-intensive they will be favoured by a fall in the wage-rental ratio. followed by Iron (6). indicating that the change in the wage-rental ratio is of much more importance for these industries than for the others affected. Utilities (50).03 -0. The explanation here probably lies in the relatively large wage-rental ratio fall induced in these cases.36 -0. The effects of these experiments on the wage-rental ratio.20 -0.27 -0.19 -0. Some capital which has been accumulated in the mining industry might not have been accumulated at all in the absence of mining. Only Agriculture (I) and Petroleum and Gas Wells (9) are slightly less favoured. Uranium Mines 6.15 0. when the industry is absent only its labour is available for use elsewhere. A comparison of the two results should give an indication of the importance of the wage-rental ratio effects on resource allocation. the exchange rate change and the input-output relations tend to be the predominant influences at work. and some service industries . reflecting the loss of exports from the industry. some transport (especially rail).04 0.00 -1. without Gold (7) and Coal (8) the price of foreign exchange actually falls.02 -1. Asbestos Mines II.43 -2. ( 44 Wage-Rental Ratio apital Rem()\'ed 45 . although there is a discernible difference between the effect of the absence of capitalintensive mining industries (which causes the wage-rental ratio to rise) and that of other.01 0.07 0. (54).16 -0. In most cases. the pattern of industries which are affected strongly remains much the same. and Lime (37) .13 -0. Thus.31 -0. Tahk 6 Selected c:ITe('(s r!l'llhsellce I!/the Millillg flldllstrie. Iron Mines 7. Overall. Gypsum Mines 12. il Mining Industries Absent: Capital Removed As pointed out earlier.15 0.05 -0.28 As would be expected.68 0.14 -0.01 0.11 0.25 -0. These are either suppliers to mining industries or labour-intensive industries hurt by the rise in the wage-rental ratio.10 -0. Construction (43).42 -2. perhaps so much so as to offset the reduction in mineral exports. and thus it is not surprising that industries which produce highly tradeable products should be favoured. However.Gold (7). as opposed to those operating via exchange rate changes and the input-output relations. Hospitals. Coal Mines 10. Some capital will indirectly be released as a result of the reduction in outputs of industries linked to mining. and Health (54).04 0.01 -0. When any mining industries are absent. the price of foreign exchange rises.78 -1.especially Education. those industries tending to fall when mining industries are absent include Services Incidental to Mining (15). Much of it reflects capital which was financed from abroad.65 -0. Hospitals.02 0. Other Non-Metal Mines 14.87 -0. For the others. The pattern of industries adversely affected is also quite similar. more labour-intensive. The exchange rate tends to move in the same direction. Coal (8). industries. and Construction (43). We have conducted an alternative set of computations in which the various mining industries were removed and their associated capital was removed as well. but it is never enough to overcome the effect of the direct reallocation of labour on the wage-rental ratio. with Base Metals (4) being by far the largest. and the changes in outputs by industry in table 7.44 0.02 -0. What is perhaps a bit surprising is the fact that even though the absence of some mining industries causes the wage-rental ratio to fall rather than to rise. Quarries and Sandpits ~6.02 -0. The forces causing particular industries to benefit most from the absence of the mining industries have already been dealt with in detail above. Gold Mines X. Cement n. The magnitudes vary because the size of the mining industries vary. Whereas the wage-rental ratio tended to rise in the latter. Salt Mines IJ. and the welfare index are reported in table 6. they are industries which do not produce tradeable commodities.do not tend to affect as adversely such labour-intensive industries as Education. The cases in which the wage-rental ratio falls .17 -0.10 -0. In addition.

23.44.34.4.40.35.17.0005.25.42.17.31 32 26.42 50.6.32 20.23.33. Uranium Mines 6.41.4 1. 33.27 .33.44 10.000 3.19.24.21.26.00020.. 35.2.000 20.38.21.38. 33.34 20.30.44 32 20. 24. I9.27.29 .00050.28.2.00030. 34.42 Metal Mines 5.31.23.34.30.38.8.000 9.26.26.13.42.23.30.40.33 1.38.42 26. 41 32 36.34.27 .28 . Quarries and Sandpits 32 20. Gold Mines 10.00010. 28.6.20.36. I3.3.29 5.32 20.38 3.47 31 1. 29 4.000 16.8. Other Non Metal Mines 32 31 14.000 20. 35.8.13. 30.42 37.19.26.21.30.32 t .31.3 I.9.19.000 20.26.44.21.42 31.17. Asbestos Mines 32 31 5.43.33. Coal Mines 10. 45.000 9.41. Salt Mines 32 13.35.25.25.25.38.32.8. Cement 1.33.27.6.23.42 2.00020.22.35.23.38. 28 10.41 20.23.44 2. 35.34. Base Metal and Other 100. 2 1.21.~ Table 7 Classification a/Output Changes Resulting From Absence a/the Mining Industries: Capital Removed Industries Whose Output Expanded by: ($ Thousand) 50.31.20 25.8.16.21.000 20.30 31 20. 26.000100.32. 33.29 2.000 1.49.39.9.30.38 .30.000 More than Absent Industry 4.9.21.42 4.19.47 1.19.19.8.l Table 7 (continued) Industries Whose Output Expanded by: ($ Thousand) More than Absent Industry Metal Mining Industries Non-Metal Mining Industries All Mining Industries 100.9.14.43.9.9.35 20. Gypsum Mines 12. Iron Mines 30.000 1.30 19.4 3.55 1.4.16.000 31.26.00030. 31. 33 30.4.41 1.26.38 1.2. 34.27.16.34.42 1.33.42 I I.31.35 20.000 1.2 J.24.23.14.4.25.26.21.26.24.30.000 28.9.9.13.6. 27.47 .5 I.34.25.28.30.36.4.27 .40.27 . 35.31.44 20.38 1.34 .33.35 8.29 10.41 16.000100.6.6.55 1.42 32 20.38 35.25.2.17.32. 33.41. 28.19.25.24.41 2. 19. Lime ~ -.42 32 7.41.26.23.30.28.00010.26.23.25.6.8.34.25.25.23.35.0005.2.27.31.35 4.28.16.29 22.28.38 2.13. 27 .00050.41.30.30. 41.25. 51. 33.19.35.25.29.

49.45-47.17.53.38.24.37.24.51-56 16.12.28.50-56 3.54 3.49 15.22. 46.21. 27 .25.47 3.11.48.39.43.39. 47-54 23.13.29.48.48.000 0-1.9-13.46.10.44. 22.000 12.42.49.44 37.43..50.46.39.37.52.16.36.36. Coal Mines 10.36.56 13.53.24.28.3.000-5.50. Iron Mines 7.40 11.56 16.24.23.13. 45-56 .53 50.24.45.18.6.54 52.22.12.53 50. Quarries and Sand pits 36.44 3.000 5.12.51.46.48.47 1-10.53.18.46. Asbestos Mines I I.000 0-1.5.5.7.18.54.55.. 29.48.7.40.34-38.29.50..50. 16.39 49 15.43.49.14.22.40 3. 37.14.48.5.45.14.17.40 1.51.11. 48.44.41.40.53-55 11.16.23.54-56 51-53 43 15.48.000-10.46. 46. 37. 21.3. 00 Table 7 (continued) Industries Whose Output Decreased by: ($ Thousand) Expanded (conL) Absent Industry 4.34.56 15 39.44.36.27 .45.28.48..14.56 15. 50. 37.47 1.36. Uranium Mines 6.34.13-17.56 15.10.46.47.36.3-11.22.13.6-8.38.55 43.22.54.24. 44.18 15.45.39. I" \0 Table 7 (concluded) Ex panded (con L) Industries Whose Output Decreased by: ($ Thousand) 0-1.45.7.47.16.55 51-53.56 43 18 15.22.49.40-42.43.54 15.48.21.53 56 8.000 8.45 46.48.14. 36.50 18.49.49.16.7. 40.12.21.7.54 39.000 1.24.45.18.46.37.43.19.12.15-19. 22.43.40..41.37.55 46.000-5.19.55 43.39.9-13. 22.44 12.37.49.4·U5 2.11.52 56 37 18.36.10.29.2.11.52 43.10.000 15. Gypsum Mines 0-1.000 More than 10.11. Lime Metal Mining Industries Non-Metal Mining Industries All Mining Industries 5.54-56 .12.49.45.5.52.24.000 Absent Industry 5. 50.56 18.22.14.21.37 18. Gold Mines 8. Salt Mines 1.14.40.45.12.7. 17.47 5.7.39.9-15.50.39..51.24. 40.40. 50. Cement 37.5.7.36.15.27 .2730.54 39.47.24.39.27.52 43.22. 17.51.5.29.18.46.10.18.47.37.38.51.11. 22.5. Base Metal and Other Metal Mines 5.52.49 2.47 18. Other Non Metal Mines 14. 17.000 More than 10.45.54.45. 55.34.52.40.36.39 43.15.56 3.23.46.29.18.17..50-53.14 22.45.17.17.12 2.33.44.000-10. 51.49.39.48.48.53. 33.26.29.3-7.17.

Apparently the capital intensity of these industries is not after all an important factor in explaining the strong increase in their output. the capital used in mining would not have been accumulated at all had mining not existed. which is about midway between the other cases. even when the exchange rate falls slightly. because of the reduction of resources available when some capital is removed. There is. never being as much as 0. Both of these are approximately halfway between the percentage changes obtained earl ier. Utilities (50).75 percent. Leather. By the same token. Chemicals (41). of course. However. but which are now less strongly affected. These industries were all strongly increased when mining industries were removed without removing capital. However. If the economy were undistorted the welfare index would always fall when an industry is removed. Welfare falls when all mining industries are absent together and when non-metals are absent but rises when the metal mining industries are missing. Textiles. Large increases are registered in Agriculture (I). The results we obtained were very close to what would be obtained by simply interpolating between the two extreme cases. Next strongly affected are Other Electrical Products (35). Services Incidental to Mining (15). as table 2 indicates. Inspection of table 7 reveals an unexpected degree of similarity with the results obtained when capital was retained. as it does when Gold and Coal are eliminated. There are more industries whose outputs fall now than before. We also conducted an intcrmcdiate experiment in which all mining industries were absent and one half of the capital that they use was assumed to be available for use elsewhere (as well as all the labour). Thus. But the overall similarity of results indicates that once again the input-output relations appear to have the strongest influence. Machinery (31). Iron and Steel (25). They do not include utility changes arising from the reallocation of labour amongst various occupations. and Clothing (20).15 percent when mining is removed. Other Non-Metallic Mines. Smelting and Refining (26). Gypsum. There are some industries which were previously much more strongly affected than they are under the present assumption of capital removal. All this would indicate that perhaps the strongest influence of all lies in the inter-industry input-output relationships. Motor Vehicles (32) are most strongly increased. I. no way of knowing how much capital would have been accumulated in Canada had the mining industries not existed. Chemicals (41). Once again. Motor Vehicles (32). Other Transport and Storage (48). Pulp and Paper (23). The wage-rental ratio rose by 0. the capital stock would have been the same in the absence of mining and second. In addition. Construction (43). This is a rather unexpected result and must be explained by the fact that in the other seven cases resources are being reallocated towards industries which are . Food and Feed (16). and Clothing (20). Leather. Metal Fabricating (30). Petroleum and Gas Wells (9).Food and Feed (16) and Petroleum Refining (39) .. In every case both increases and declines in welfare are insignificant. along with exchange rate changes. These industries are either suppliers to mining or non-traded goods industries (or both). many of the same industries whose outputs fell previously continue to be strongly discriminated against here. Those ineustries which fall most when all mining is eliminated include Services Incidental to Mining (15). and Miscellaneous Manufacturing (42). For example.1 percent. especially Education. industries which use the products of these industries as inputs . indicating that log-linear interpolation would be appropriate for predicting the effects of any other experiments. Declining less strongly are Truck Transport (46). The previous experiments considered the extreme cases: first. and Rail Transport (45) are strongly reduced now. Other Electrical Products (35). Those previously discriminated against mostly due to the rise in wage-rental ratio. Wholesale and Retail (51). along with Machinery (31).are much less strongly affected. and Owner-occupied Housing (52). The changes in industry outputs obtained when half the mining capital is removed are once again predictable from interpolation of the two extreme cases. and Metal Fabricating (30). Utilities (50). The changes in the welfare indices computed for the various experiments are shown in tables 2 and 6 above. Construction (43). 50 51 The Effects on the Welfare Index As discussed earlier.'11. as before. changes in the welfare index reflect changes in the utility level resulting from changes in the quantities and composition of final demands. Agriculture (I) and Petroleum and Gas Wells (9) were previously much more strongly increased when the mining industries were absent but their capital allowed to reallocate. Iron and Steel (25). and Miscellaneous Manufacturing (42). Rail Transport (45). and Health (55). welfare falls in only five cases out of the twelve -Iron. For individual cases. and Communications (49). The exchange rate rises by 3. our measure shows welfare actually increasing in several cases when mining industries are missing but all capital is allowed to reallocate. Asbestos. and Quarries and Sandpits. Smelting and Refining (26). Hospitals. are the service industries.09 percent and the welfare index falls by 1. The rise in the price of foreign exchange is still an influence in causing these outputs to rise as are input-output relationships. The reasons for these effects are as outlined above. Textiles. many of which are far from direct. many of these same industries are still most strongly affected. These are cases in which the change in wagerental ratio is likely to be quite important since they are strongly capitalintensive. less labour is released relative to capital (as compared to the national average) even though only half of the capital is released.

and Other Non-Metallic Mineral Products. Metal Casting and Extruding nes. we could have exogenously increased final demand devoted to the mining industry in question but this would have entailed reducing the share of expenditures devoted to other induslries in some arbitrary way (since all shares must add to unity). It does not reflect any dynamic or longer run effects that might occur from doing without an industry. The computational method of inducing an expansion in the mining industries is to increase the demand for exports exogenously. 'II:':I I'" . the reduction in welfare amounts to 2. Unfortunately. I. we perform a slightly different. In lerms of the notation in appendix I. It would have been ideal to separate this but for confidentiality reasons we were unable to. Metal Fabricating. and perhaps more realistic. The Effects of Expanding Mining and Processing Industries Introduction In the last chapter the impact of the mining industries was assessed by a hypothetical consideration of how the nation's resources (or factors of production) would have been used had the mining industries not existed. More generally. Overall. Smelting and Rejining includes aluminum smelling and refining. 2. prices. One must caution against reading too much into this result. welfare does fall in all cases except one . growth rate. the shock general equilibrium solution was compared with the control solution to obtain the effects on resource allocation. Furthermore. such as a change in capital accumulation. The estimated welfare loss is a completely static measure.\' and presumably forms a small part of that industry. When all mining industries are absent together. In this chapter. however. We include the processing industries because of the obvious public interest in the debate as to whether more minerals should be processed in Canada rather than exported in the raw form. When capital is removed along with the mining industries we have all the more reason to believe that welfare should fall. any fonnulation of a so-called' industrial strategy' for Canada must presuppose knowledge of the sorts of allocative effects we attempt to compute here. 5. Smelting and Refining. The fact that the products of most industries are readily available through foreign trade must account for this to a large extent. most of which is due to the metal industries which employ significant amounts of resources. 52 53 .discriminated against either by the tax and tariff system or by a relatively high wage rate. the economic loss from reallocating factors of production amongst industries is not large. In fact. since now we are reducing the amount of resources available to the economy as a whole. the exchange rate. The processing industries included in this economy were /ron and Steel. Copper and Alloy Rolling. These industries are conveniently aggregaled according to Ihe degree of processing done.3 percent. and because of the close linkages between the processing and mining industries. There was no obvious a priori way of doing this.Coal Mines. In each of the eighteen cases. and welfare. 1 The actual computations performed were to exogenously shift the export demand functions by $10 million for each of the twelve mining industries and six processing industries 2 separately. we increase Eo1 by some exogenously detennined amount. Alternately. or pattern of economic development. exercise designed to evaluate the impact of an expansion in production in the mining and processing industries. These results may be more relevant for policy makers who might be considering measures which may cause an incremental change in mining and processing. we have not included Coal Products as a proc-essing industry since it is subsumed under Other Petroleum and Coal Producl. the observed changes in welfare are surprisingly small.

ii Transport Industries (44-49): Water (44). Cement (36) and Lime (37). 3 In addition to these influences at work due to the effect on the wage-rental ratio. their demand falls more. because of direct linkages between the industry to be expanded and certain others. and their output contracts more. say. Those industries which expand when mining industries expand tend often to be suppliers of inputs into the relevant mining industry. Thus.Base Metals (4). We discuss these results by first considering the industries which benefit from mining expansion and then those whose outputs are reduced. mining must be drawn from elsewhere in the economy. capital has been made more scarce in the economy relative to labour and the wage-to-rental ratio falls. For example. vol. Gold (7). not all mining industries caused transport to increase . iii Utilities (50): This industry increased substantially from increases in Gold (7). This linkage is not nearly as strong as that of Services Incidental to Mining (15). Those industries which benefit from an expansion of a particular mining or processing industry will normally do so because of a direct or indirect backward linkage from mining via the input-output system. The industry numbers refer to the industry aggregation as presented in table I. 557-72. The following cases of such backward linkages from mining may be cited: i Services Incidental to Mining (15): This industry increases substantially from an expansion in Base Metals (4). Of course. W. all industries are encouraged to employ more labour-intensive techniques. Industries which use that industry's product as an input will therefore be adversely affected. Thus. any increase in resources devoted to. 73. 1966) with a fixed quantity of resources. Cement (36). Second. Therefore. Rail Transport (45) was the one most frequently affected positively. and Other Non-Metals (13) did not. and Lime (37). Salt (12). Capital-intensive industries find their costs rising relative to labourintensive industries and thus their prices rise more. We verify from the input-output coefficients in table 14 that these latter industries are very minor users of Services Incidental to Mining (which involves such things as exploration). the price mechanism determines from which industries the resources it uses are drawn. These influences may work so strongly to the benefit of labour-intensive industries or import-competing industries as to induce an actual expansion in their outputs. all transport industries except Pipelines (47) tended to increase when some mining industries increased. these latter may also experience an increase in output thus drawing even more resources from the rest of the economy. because of the induced wagerental fall. However. other capital-intensive industries would be affected more strongly than labour-intensive ones. has a high capitalto-labour ratio compared to the rest of the economy). suppose that the industry which expands is relatively capital-intensive (i . Its expansion requires relatively large amounts of capital compared to labour. and less 54 55 .. First. When an industry's output expands. Asbestos (10). Journal of Political Economy. exactly the opposite sort of mechanism is at work if the industry initially expanded is labour-intensive. It increases by a smaller amount from expansions in all mining industries except Coal (8). outputs of various industries are also affected via changes in the exchange rate and due to inter-industry flows as depicted by the input-output table. since we are assuming that the economy is endowed at a point of time (i. and Other Non-Metallic Minerals (38). all by an initial $10 mill ion increase in export demand. Rail (45). Gypsum (II). it is possible that other influences may cause an industry to expand. 1965. Jones. However. Gypsum (II). more labour is released relative to capital because the rest of the economy is less capital-intensive. The inter-industry relationships can work either to the benefit or to the detriment of an industry depending upon whether an industry which uses its product as an input expands or contracts. Uranium (5). The computations will tell which industries are reduced when mining is expanded. Expanding the Mining Industries Table 8 summarizes the industries whose outputs increase or substantially decrease when exports are exogenously increased in the various mining industries. and Truck (46) transport rose substantially when expansion occurred in Iron (6).. INDUSTRIES WHOSE OUTPUTS EXPAND 3. the latter may be expected to expand. Other Non-Metals (13). In addition. when resources are drawn from the rest of the economy. These mechanisms are all familiar to students of international trade and are summarized in a two-sector model in R. pp. Also. when a capital-intensive industry expands it forces the wage-rental ratio to fall and the exchange rate to fall. Overall. The exogenous increase in exports would be expected to cause the price of foreign exchange to fall thus discriminating against both import-competing industries and other export industries. Rail (45) and Truck (46) transport rose substantially when Lime (37) output increased. In the following sections we summarize the effects of expanding first the ining industries individually and then the processing industries. if an industry expands due to an increased demand for its output. However. and Quarries and Sandpits (14). If the mining or processing industry purchases significant quantities of the output of an industry.e. Coal (8). The remarkable thing about these results is the extent to which all the mining industries tend to affect the same industries both positively and negatively. its relative price will rise. we expect that when a capitalintensive industry expands.1 I''1 ""~ There are two important sorts of resource allocative effects to be observed from an exogenous expansion of one of these industries.e. 'The Structure of Simple General Equilibrium Models'.

Quarries and Sandpits (14). Petroleum Refining (39) by an expansion of Quarries and Sandpits (14). o -. o 6 In '" N e:ie:i N N N ":N N o • O. 4 However.. both of which tend to be beneficially affected by the expansion of mining. The most obvious of these is Construction (43). -0 .. o o 8 '" o o'" N '". We must therefore look elsewhere for the source of its increase.so from all other mining industries with the exception of Base Metals (4) and Uranium (5). Such is the justification for employing a general equil ibrium computational technique to study the impact of expanding the mining industries.. One does not need a sophisticated general equilibrium computation to deduce where strong backward linkages lie.-)V: '" o '': N N N --:0 0:-: . """". -0 N -0 r. - r- . Its output increases substantially when "'Base Metals (4)." c: oj . 0' '"· '". 'Resource Industries in the Canadian Economy' and Stahl.0 08 o . See. but the Pulp and Papcr increase is not so obvious and presumably has to do with induced effects via the inputoutput tables.0 ~ that the industries causing increases are fairly heavy users of utilities. This is therefore a fairly strong backward linkage.1 00. It is...c 0 -0 "'0 0-= ~ '" "! -0 N '"~ ~\D ~ ~C'i~ .' In '".i ~ ~ 1'"1 ~ trl -0 N ~ o \0 v: """'''" r<') 0'" N ""o'n ('"\1 '". . Perhaps as important is the fact that Construction (43) tends to be a labourintensive industry which benefits from the reduced wage-rental ratio arising when the capital-intensive industries expand. N "" :. Once again. Asbestos (10). · -0 00 ' " . or Utilities (50). In In '" '" 6'-Ci o -0 '" ": "': . 'The Mineral Industry and Economic Development'. Other Non-Metals (13).. N '" lr) N N . '" - 'n c: oj 0-": There are a number of other industries which benefit from an expansion of mining industries but which are not so directly connected as the above..0 ('. inspection of the input-output coefficients verifies o '" ~ '" N .cO -0 ". the pattern of industries whose outputs have been reduced is very similar for the expansion of all mining industries..> V)o-'Vr- -tn--oq -00 ": '" r- r') "'? V) V) M "" N '" If) a '" o 'V.. and the Dummy Industry (56) by Asbestos (10). The Petroleum and Dummy industry increases are clearly cases of backward linkages. 0'" '"· -0.!. It is perhaps the industry most beneficially affected by expansion of the mining industries. -0 --: "" v) '" 'n. '". one does need some pricing mechanism to infer from which industries the expanding sectors draw the needed resources. '"'" "!- ~ o '" \0 <'! C"'-l "'-0 ": ~ In ("f) - N '" '"": '" 'n· 'n' "'''" "" . and Lime (37) increase and less so when all other mining industries except Gold (7) and Coal (8) increase. the studies cited earlier by Bucovetsky. Salt (12).no '" vtnvv. Cement (36). of 4. "!'" o o '" ".'" '" 0 tri - - 6 .. N '" "" ('f") <""I '" 'n '" 'n 0""":0 If') C"') 1(") 'r: "" . For one thing. As table 8 indicates.q-V)M" N 1(") v V) ~ '': --: ('f")~ ex. Construction (43) is not as substantial an input into the mining industries as Services Incidental to Mining (15).r N "" '" oo. for example."N . and Lime (37)."'" "! '"o '". '". when the economy faces resource constraints. N V) N ("'.o~ -... 56 57 . Iron (6). 00 o - N 00 INDUSTRIES WHOSE OUTPUTS CONTRACT The above cases in which outputs expand are most often traceable directly to the input-output relationships. Yet. it is a large input into Rail Transport (45) and Owner-Occupied Housing (52).. Gypsum (II). Transport Industries (44-49). We therefore proceed by considering in rough order of magnitude the industries which are most adversely affected and attempt to explain the main causes at work. The only other industries to be significantly favoured are Pulp and Paper (23) by an expansion of Salt (12).

and Clothing (20). The service industries. One obvious reason for this is that these are capital-intensive industries and thus suffer from the reduced wagerental ratio. THE WAGE RATE. however. The causes given below must therefore be considered more or less conjectural. Inspection of the computational results confirms that imports rise significantly.. For example. The change in the price of foreign exchange exhibits a similar pattern. and industries which use as inputs capital-intensive products. There must be some indirect affects operating through the intermediate inputs used in this industry. v Agriculture (I): The output of agriculture falls by at least $1/2 million in all expansions and by over $1 million for Base Metals and Coal expansions. The overall impression created from expanding the various mining indus. AND THE WELFARE INDEX The effects of mineral production expansion on the wage rate and the exchange rate have already been mentioned above. exports of these industries are adversely affected and thus so is output. This. The case of Gold (7) is somewhat puzzling. Their expan. there are some industries which are significantly reduced by a few of the mining expansions. Also. a large proportion exported and/or imported. Utilities (50). due to the fall in the price of foreign exchange. from table 12. ii Leather. Finally. The initial rise in exports will tend to depress the price of foreign exchange for obvious reasons. and since they are traded the reduced price of foreign exchange presumably has some adverse effect. Machinery (31). if the 59 . The prices of their inputs are increased due to their high capital intensity. sion increases the demand for capital relatively more than that for labour. The computations indicate that the wage-rental ratio falls when all mining industries expand except for Gold (7). iii Iron and Steel (25): This primary processing industry is probably affected mainly by the lower wage-rental ratio in conjunction with the higher price of intermediate inputs which are also capital-intensive. THE EXCHANGE RATE. This could not be the only cause. As well. vii Food and Feed (16) and Other Electrical Products (35): These industries fall by at least $1/2 million in all cases. the rest of the smelting and refining industry may be even much more adversely affected than these figures suggest. The 58 likely cause here is the reduced price of foreign exchange which is detrimental to exports on the one hand and beneficial to import competition on the other. and Agriculwre (I). i Metal Fabricating (30). vi Petroleum and Gas Wells (9): This is strongly affected by many but not all expansions. since the exchange rate rises in the case of Gold (7) expansion and yet imports rise and domestic production falls in Leather. In addition. One ought to mention here the fact that the aluminum smelting and refining component is likely to be beneficially affected due to the lower price of imported raw material. It falls in each case except that of Gold (7). There are probably other indirect influences operating via the input-output relationships. and Construction (43) are not severely affected. and for much the same reasons as above. These include Other Transport Equipment (33). tries. Any expansion of the min. the reduction in the price of foreign exchange makes imports cheaper and the domestic industry is forced to contract.'II ~ 1'1 course. Textiles. Therefore. ing industries must come at the expense of these types of manufacturing indus. This reflects the capital-intensive nature of the mining industries. mak· ing capital comparatively scarcer and therefore forcing its price to rise (rental) in relation to the price of labour (wage rate). and Clothing (20): This industry is reduced by at least $1/2 million when each mining industry expands. iv Smelting and Refining (26): This industry is also strongly reduced by all expansions. effect. we see that the Gold (7) industry is much less capital-intensive than the rest of the mining sector. viii Petroleum Refining (39) and Other Petroleum and Coal Products (40): These are reduced significantly by almost all expansions. is not the entire reason since. and Miscellaneous Manufacturing (42). we see that other industries have larger capital intensities but are much less affected. The reasons are likely to be the same as for Agriculture (I) capital intensity and reduction in the price of foreign exchange. The backward linkages to the gold mining industry must cause rela· tively more labour-intensive industries to expand to offset the capital intensity of the Gold (7) industry. by inspection of table 12. PUlp and Paper (23). Communications (49). all these industries use inputs from capital-intensive industries and therefore face higher input prices when the wage-rental ratio falls. Petroleum and Gas Wells (9). tries is that selected manufacturing industries tend to be systematically discriminated against. and Motor Vehicles (32): These industries are consistently reduced by a significant amount (over $1 million) when any of the mining industries expands. however. Agriculture (I) does tend to be fairly capital-intensive. It is strongly reduced by all mining industry expansions. and by over $1 million when most expand. Finally. presumably due to the exchange rate . Such forward linkages may account for much of the reduction in the outputs of these manufacturing industries. somewhat dangerous to ascribe a particular cause to each industry's decline when so many things are going on simultaneously. Since this is not a capital-intensive industry the source must be sought elsewhere than in the changed wage-rental ratio. This particular case points out clearly the need for a computational method such as this to obtain the effects of expanding mining industries (or any others for that matter). Textiles. They include those which are especially characterized by high capital intensities. The most likely explanation is that since this industry is mainly import-competing.

l0• I-< 0- ~ 5. causing the price of foreign exchange to rise. ~ 0\. 60 <n '1" :::<n INDUSTRIES WHOSE OUTPUTS EXPAND IW_ o 1 0 <n\O NN 61 000\ NN 000 MM . Salt (12). '1". and Quarries and Sandpits( 14)] and falls in the other six [Base Metals (4). The results are depicted in table 9.. O<n M. We cannot say a priori which of these influences is strongest in any of the above cases.. The wage-rental ratio rose. It rises in six cases [Iron (6).n N. MO O<"'!. ij Smelting and Refining (26): As would be expected a large increase in Base Metals (4) is induced via an obvious backward linkage. imports would fall and the exchange rate would fall further.co E-<o As in the mining expansion experiments. and Utilities (SO). all of which are inputs purchased by the iron and steel industry. It is very difficult to pinpoint the reasons for this result. <n M o o o I o o <n .N·-___ 0'\. Minor increases are C1. To the extent that import-competing industries tend to be relatively labour-intensive. Cement (36) and Lime (37)]. This statement is based on the economics literature on the 'theory of second best' as first developed in Lipsey and Lancaster. N.wage-rental ratio falls as a result of the mining expansion. The effect of expanding the mining industries on the welfare index is mixed. and Quarries and Sandpits (14). discriminating against import-competing industries and causing a rise in imports. Coal (8).l0• I-< 0- MM 00 NN ~ \0 <n Expanding Mineral Processing Industries 00 The impact of expanding the Canadian minerals processing industries is obtained much as above by exogenously increasing initial export demand by $10 million. Gold (7).."" ""I' 00 <n"": cc<j . Asbestos (10). O\~ --'1"-- cc<j .M N• N• M\O<n\O\O "o-. increases are induced in Rail Transport (45). The rise in imports more than offset the initial export increase.co E-<o C1. an expansion of the processing industries tends to benefit industries directly or indirectly linked on the input side to the processing industries. Welfare may rise if resources are shifted into industries which tend to be discriminated against by the tax system 5 or if resources are pushed into industries with relatively high wage rates. <n<n N<n ~ N '1"M . This would indicate that. It is simplest to consider each processing industry in turn and the increases in output it induces via its backward linkages. 1 0 00 I'/. In the case of Gold (7). '1". Lime (37). To a lesser extent. given the existing set of distortions. 'General Theory of Second Best'. all of which are sizeable inputs into Iron and Steel. the economy would be better off if the former six expanded incrementally and the latter six contracted. Uranium (5). i Iron and Steel (25): This industry causes output to expand substantially in Iron Mines (6). <nN M. Other Non-Metals (13).. Gypsum (II).. M. Our analysis of the effects proceeds as before by considering separately those industries which benefit and then those whose output is reduced. this will discriminate against capital-intensive industries making their prices higher. Coal (8). the opposite seems to have occurred.

as well as utilities and construction. any measure which increases output in these industries should improve welfare. and Metal Casting and Extruding n. Lime (37).s. (29). Other inputs less significantly increased include Uranium (5). and Utilities (50). and Metal Casting and Extruding n. Services Incidental to Mining (15).J 16). Aluminum Rolling and Extruding (27). . and Clothing (20). Therefore. Lime (37). of course. and Utilities (50). Services Incidental to Mining (15). Services Incidental to Mining (15). The effects on the welfare index tend to be slightly stronger in the processing case than in the mining case. (29): This industry significantly increases Base Metals (4) and Smelting and Reflning (26). that in general the industries benefiting from the expansion of both the mining and processing industries do not include other manufacturing industries. the existing tax and tariff structure tends to discriminate against processing industries. Lime (37). They are mainly primary and service industries.s. We find that the welfare index rises in every case except that of Smelting and Reflning (26) indicating that society would benefit from an expansion of these processing industries. Agriculture (1). We need therefore provide only a cursory summary of them here. Gold (7). Uranium (5). Then. Other Transport and Storage (48). thereby making their outputs lower than they otherwise would be. and Utilities (50). we have no way of knowing to what extent the reduced welfare from increasing smelting and refining is due to aluminum smelting and refining as opposed to the smelting and refining of domestically-produced minerals. Increasing Suppl ies of Labour and Capital The expansion experiments described above were performed assuming fixed 63 . all of which are directly or indirectly inputs into Smelting and Refining.e. Chemicals (41). vi Other Non-Metallic Mineral Product (38): Industries whose outputs increase substantially include Cement (36). and increases by minor amounts Iron Mines (4). All of these may be seen from the input-output tables to be large direct or indirect inputs into Copper and Alloy Rolling. another labour-intensive service industry benefiting from the expansion of some processing industries is Wholesale and Retail Trade (51). Owner-Occupied Housing (52) which benefits from all but Smelting and Refining (26) and Copper and Alloy Rolling (28). Gypsum (II). (29). Textiles. Those most strongly reduced in most cases continue to beLeather. These increases are all to be expected due to the direct or indirect linkages.e. Asbestos (I 0). Other Electrical Products (35). Metal Fabricating (30) is next most strongly affected because of its capital intensity and the capital intensity of its inputs. Rail (45) and Truck (46) transport increase slightly. iii Copper and Alloy Rolling (28): Inputs increase here substantially in Base Metals (4). Agriculture (I). Food and Feed . Metal Casting and Extruding n. 62 INDUSTRIES WIIOSF UU I'I'UTS CuNTRACT The pattern of industries advcrsely affected by expansion of processing industries is remarkably similar to those affected by the mining industries and for much the same reasons.s. Hospitals. (29).s. as in the case of expanding mining industries.e. As earlier. ~to be c~tal-intensive or highly tradeable manufacturing industries. THE WAGE RATE. THE EXCHANGE RATE. there are increases in other industries which are not so easily explained by direct linkages. finally. and by a lesser amount. v Metal Fabricating (30): This industry strongly increases only Iron and Steel (25). Smelting and Refining (26). This reflects the capital-intensi ve nature of the processing industries and of the industries which are related to the processing industries by backward linkages. and Miscellaneous Manufacturing (42) all are fairly strongly reduced as in the case of mining expansion. Machinery (31). Truck Transport (46). One conjecture as to why the welfare index increases in the other cases is that. Of course. Gold (7). as we shall find in the next chapter. AND THE WELFARE INDEX The effects of increasing mineral processing on the wage rate and exchange rate are similar to those obtained when the mining industries expand. and Motor Vehicles (32). Once again. Aluminum Rolling and Extruding (27). Overall. on 'second best" grounds. This is due to the combined effect of the initial exogenous export increase and the depressed wage-rental ratio which beneficially affects some import-competing industries. This. However. as before this is due to capital-intensity and exchange rate effects. the source of the benefit is likely to be found in the fact that these industries are labour-intensive and benefit from the reduced wage-rental ratio. an expansion of the processing industries tends to increase outputs in the mining industries and in the prior processing industries as well as Utilities (50) and some transport industries. These include especially Construction (43) which benefits from all processing industry expansions except Metal Fabricating (30). and Utilities (50). Petroleum and Gas Wells (9). Gold (7). In addition. is a higher stage of processing than the previous ones listed so is expected to have a strong backward linkage. and Education. These are the industries which would have to contract if an expansion in processing of minerals in Canada were to be induced. Notice. iv Metal Casting and Extruding n. The price offoreign exchange also falls in every case.e. The wage-rental ratio in the economy is reduced when each of the processing industries is expanded. In addition. Petroleum and Gas Wells (9) or industries using capital-intensive inputs that are discriminated against most strongly. Quarries and Sandpits (14). and Health (54).caused in Uranium (5).

they will be discriminated against. To assess the impact of such increases we have computed the general equilibrium changes occurring from expanding the available supplies of labour and capital separately. The results obtained from this experiment were in many ways the mirror image or opposite of those attained when capital increased. Slightly less sizeable absolute increases occur in Agriculture. Similar sorts of influence are at work here as above.. THE EFFECTS OF INCREASING THE LABOUR SUPPLY The labour supply was increased exogenously by 100. We shall briefly consider the workings of these influences by discussing the impact of adding to the capital and labour supplies in turn. This transmission mechnism is well-known in the theory of international trade and is explored in depth by Johnson. and Real Estate. Incomes rise due to the increase in capital resources and this induces an increase in imports.much of it apparently caused by a very large rise in imports. The exchange rate surprisingly fell by 1. They include Pipeline Transport (9. capital to the economy would make capital relatively less scarce compared to labour. Other Petroleum and Coal Products (8. The other industry showing a strong increase is Other Non-Metal Mines which rises by nearly 14 percent. 1958). All other industry outputs rise but some rise much more substantially than "'others. Other than this latter industry. Thus. thus causing the wage-rental ratio to rise. imports of this product fall substantially due to the rise in the price of foreign exchange. and Gold (0. The first two changes are brought about by a large rise in import substitutes.G.5 percent. (Imports rise by $19 million and output falls by $14 million. and the last is caused by a large fall in exports. In absolute terms the industries which fare best from an increase in available capital are larger industries including Finance. Also. 6 Even though the supply of capital increases and labour stays the same so that the economy's production possibil ities expand.37 percent). None of these changes is significant and in all cases they appear to be related to changes in trade patterns. The apparent cause of the fall is (hat the fall in the wage-rental ratio assists many import-competing industries . demand conditions. Oddly enough. and Petroleum Refining (6. say. Petroleum and Gas Wells. and industries related to the latter. The price of foreign exchange rises by 4. Petroleum and Gas Wells. the general equilibrium was shocked by increasing capital by $1 billion (about 7. and Clothing (0. the magnitude of the rise is approximately 7. Ltd. the industries benefiting tend to be dominated by service industries. exactly the same as the increase in capital. The other industries whose outputs fall include Other Transport Equipment (1.17 percent). Leather. and Food and Feed. probably reflecting the two influences mentioned above. The wage-rental ratio of course fell. As would be expected the rise in available capital causes the wage-rental ratio to rise. InternationaL Trade and Economic Growth (London: George Allen and Unwin.2 percent despite the induced increase in imports caused by a rise in incomes. Petroleum and Gas Wells rises by over 14 percent. THE EFFECTS OF INCREASING THE CAPITAL STOCK In this case. the output in some industries actually falls in the new equilibrium. If export and importcompeting industries are labour-intensive.56 percent). Three other industries closely related to Petroleum and Gas Wells benefit substantially from the rise in capital. and Other Services. thus causing the price of foreign exchange to rise even further.92 percent). and demand functions were combined with the larger amounts of resources. With higher incomes the demand for imports would rise. in addition. thus tending to cause the price of foreign exchange to rise. 64 tively heavily on imports for this industry. The results thus indicate how resources would be allocated if the existing technology.18 percent).5 percent of the original capital stock). This is true not only of changes in output but also of changes in capital use since the latter closely parallels the former. H. Expansions in economic activity can also occur through increases in the available supplies of these primary resources. world supply. Owner-Occupied Housing. Wholesale and Retail.20 percent). Johnson. the rise in import demand has a strongly detrimental effect on the industry. The output of coal falls by 27 percent . the magnitude of the fall was the same in percentage terms as the increase in labour supply. As with the previous case. the mining industries do not fare particularly well even though they are capital-intensive and would benefit from the rise in the wagerental ratio. Overall. The mere size of these industries militates in favour of large changes in their outputs. Another way to look at the rise in the price of foreign exchange is a spreading to the rest of the world of some of the advantages of a growth in real output in Canada. Presumably they are hurt by the rise in the price of foreign exchange which discriminates against their exports. partly due to the beneficial effect of a higher wage-rental ratio since it is a capital-intensive industry.000. Capital-intensive industries would be favoured as would those which use as inputs products of other capital-intensive industries. 2 percent. labourintensive industries would be afforded some advantage.) Because the economy relies rela6. Construction. Insurance. or about 2 percent of the original labour force. Textiles.total supplies of labour and capital. the addition of.5 percent. But. For example. the rise in wage-rental ratio discriminates against labour-intensive industries many of which are engaged in producing import-substitutes (such as textiles and food products). due to the increased availability of labour. The price of foreign exchange could also be influenced by the change in relative prices caused by the rise in the wage-rental ratio.

etc). The Effects of the Canadian Tax and Tariff Structure on the Mining Industries Introduction Governments levy a wide variety of taxes and tariffs to raise revenues to finance the public sector. and Motor Vehicles (2. The largest increases include Construction($153 million). appendix II. by comparison with other industries. an increased labour supply caused slight decreases in a few mining industries. and Other Services ($78 million). Leather. Other industries to benefit significantly in percentage terms from the rise in labour supply are all manufacturing industries .86 percent).73 percent). In general. increased labour allocations tend to parallel increased outputs. will generally cause the price of We I.09 percent).which expand. Pipeline Transport obviously. The extent of these differences is apparent from observing the tax rates in table II. Electrical Appliances (2. Pipeline Transport (1. iii The tariff. Petroleum and Gas Wells are hurt by the combination of a lower wage-rental ratio which adversely affects capitalintensive industries and thc fall in the price of foreign exchange. Demand for these products may be expected to fall in total. the mineral industries were relatively little affected by increases in the supplies of capital and labour. 66 67 . The industry which rises the most is Coal (nearly 16 percent).20 percent). As a result tax rates falling on different commodities or on different sources of income will differ.77 percent). Perhaps surprisingly.23 percent). Wholesale and Retail ($140 million). These are in line with the increase in demand to be expected merely due to the rise in incomes in the economy. Textiles.nEiustries shall refer to the latter as a neutral tax system. 6. by substituting domestic production for imports and reducing the overall demand for importable goods. In addition. Here. all mining. Motor Vehicles ($86 million). Leather. and capital taxes.70 percent). And. because the rates differ over different industries.08 percent). In this study. The total outputs of all industries increases with the increase in labour resources except for six industries which fall . A listing of these effects include: i Those items subject to a tariff will have higher domestic prices.Petroleum and Gas Wells (2. SUMMARY OF EFFECTS ON MINERALS Coal and Other Non-Metal Mining are the only mining industries which are strongly affected by changing supplies of capital and labour. through the input-output system a rise in the price of an imported input will affect not only those industries using it directly but also those industries using it indirectly (those which use an input whose production uses the imported input.4 million). The reduction in the price of foreign exchange makes it more difficult for export industries to sell on world markets.income distribution. directly and indirectly. The other industries. lOur interest in the tax and tariff structure of the Canadian economy stems from the fact that. size of the tax base. Other Non-Metal Mines (1. which discriminates against exports and favours imports.66 percent). Resources will therefore transfer out of industries whose costs have been increased relatively largely by this route.Machinery (3.02 percent). ii Industries using imported goods as intermediate inputs will find their costs have increased due to the increased price of inputs. and Clothing (2. Base Metals (0. regional effects. The choice of the mix of taxes is dictated by many considerations . on the outputs of various industries.65 percent).10 percent). replacing imports. once again the opposite of the previous case. They affect resource allocation by increasing the prices of imported goods for Canadian users. This is just the opposite of what happens when capital is augmented. but domestic production will rise since domestic producers will be willing to produce more at higher prices. and Clothing ($90 million). however. we have included three broad classes of such distortionstariffs. This is apparently caused by the fall in the wage-rental ratio as the data show the price of coal output to fall relative to all other industries. This induces several sorts of effects. falls because of its direct linkage to Petroleum and Gas Wells. Other Transport Equipment (2. ease of collection. etc. the allocation of resources to industries will be distorted as compared with what the allocation would be if t~ rates were thuame i[Ulll . Textiles. But none of these is significantly greater than the general rise in overall production in the economy due to the additional factor availability. Miscellaneous Manufacturing (2. The absolute increases in industry outputs are much larger for some of the larger industries. Resources are therefore diverted into import-competing industries. as above. and Gypsum (0. In absolute terms only the decrease in Petroleum and Gas Wells appears significant ($23. are hurt for much the same reasons as Petroleum and Gas Wells. Tariffs are levied by the federal government on the imports of the products of various industries whether these are used for final demand or as intermediate inputs. commodity taxes. especially those with the highest tariff rates. Asbestos (0.

include all taxes levied by federal and provincial governments on sales of commodities. causing a reallocation of resources out of export industries. Those with such higher gross rentals will have higher factor costs and thus higher prices.foreign exchange to fall. Commodity taxes. industries which purchase inputs from industries with higher capita] tax rates will find the price of their inputs increased more and will be forced to increase their prices. it seems likely that they are all relatively non-distorting compared with those we have considered. and the true welfare index) of eliminating the distortions due to tariffs. commodity taxes. if resources are induced to move out of relatively labour-intensive industries. and so on back through the input-output relations. industries with greater risk factors will require larger rates of return to the extent that risk-pooling is not possible through conglomeration or diversification of financial portfolios. compute a new general equilibrium system and compare it with the control solution. This table shows the effects (as measured by the absolute and percentage changes in outputs in the mining and processing industries. First. the overall effect of the commodity tax system on the wage-rental ratio and on the exchange rate will indicate whether the commodity tax system as a whole tends to favour labour or capital on the one hand and import-competing or export industries on the other. property taxes. 3 Demand will be reduced and resources will be shifted out of these industries and into others. and alcohol. labour will become less scarce relative to capital. much as in the tariff case as outlined above. The rates probably do not systematically discriminate very much against some industries as opposed to others. 3. They drive a wedge between the net and the gross returns to capital. that is. It ought to be apparent from the above that knowledge of the tariff rates themselves is not sufficient to tell us much about their allocative effects. how capital-intensive is the industry in question. For example. The net effect of the package of distortions introduced by the various tax measures was estimated. The following sections discuss the elimination of each of these types of distortion. provincial retail sales taxes. Our computations tell us the overall impact of the tariff structure when all the effects are taken into consideration. and the wage-rental ratio will fall. tobacco. as defined for the purposes of this study. our computations were done for the commodity tax structure as a whole. Since we assume that in a competitive economy the net return to capital is the same in all industries. A summary of the more important results obtained is shown in table 10. the difference depending upon the magnitude of the tax rate. In any case. These include the personal income tax. The computational procedure whose results are reported below is to remove the tariff distortions altogether. Second. ]n any case. Distortions due to Tariffs Examination of the first column in table 10 indicates that the elimination of tariff distortions causes an increase in total output in all mining industries. By the direction in movement of the wage-rental ratio. The amount by which higher capital costs will cause higher prices depends upon how important capital is as an input. 2 the capital tax makes the required gross return on capital higher for those industries with higher tax rates. include both federal and provincial corporate income tax payments and provincial mining and logging taxes. The distorting effects of commodity taxes arise by much the same mechanisms as above except that instead of falling upon imports. the exchange rate. All tax distortions other than the above three sorts have been neglected. the latter may be considered to be fairly non-distorting because the rates do not differ much over various industries. In other words. As with the other taxes we can tell from the overall impact of the capita] taxes which industries are favoured and discriminated against and which factor (labour or capital) is favoured relative to the other. Furthermore. Provincial commodity taxes include excise taxes on fuel. We are forced to ignore two important sources of differences in the net rate of return to capital in this study due to a lack of data. This makes our exports appear more expensive to foreigners so that export sales will fall. there are adverse effects on the outputs of industries which purchase inputs which are subject to a high commodity tax rate. 69 . and capital taxes. and indicate any other significant effects that occur which are not apparent from table 10. The federal commodity taxes are the manufacturing sales tax and excise taxes on tobacco and alcohol. we shall be able to tell whether the tariff tends to favour labour or capital. The data on how these taxes vary over industries is not available. singly and together. elements of monopoly tend to increase the rate of return to capital above that in competitive industries. except for the provincial sales taxes for which data were not available. As data were not available to separate these taxes out. Commodity taxes raise the price purchasers pay above the price producers receive. and estate duties. as used in this study. f~ I All of the above effects occur simultaneously and thus may cancel or augment one another. 68 The capital tax payments. In addition. the wage rate. they fall upon all domestically purchased products whether produced at home or abroad. thus inducing a reduction in demand which in turn causes a resource reallocation out of that industry and into others. thus causing a reduction in demand. The relative price paid by purchasers will increase more on those transactions bearing a higher tax rate. the existing tariff structure discriminates against the mining indus2. iv The reallocation of resources induced by the above effects will generally cause a reallocation from industries which on balance use relatively more of one primary factor of production than the other. In addition.

however.. all of which increase by over 10 percent when the tariffs are removed. Mining industries tend to be the latter. ~~~ O~O I l() 0 -0\000- I I . Since by and large the mining in..:tO\tn 00 r- o<f) (""')-r-\Cv\C 00- oo"¢ ("fj- -I 0\ "¢ ('I N r<'l-:.0 000 I I v> <ll ..v 0 \ \ 0 0 \0 C"I\0 0 \ 0 "Q" ("')O\"¢Of""'lN"¢(""')r--r- '" ~ 0\ \D "<!" I 1(") M -("")tr)O\O\("")OOOOOOON II) V(""') -00 rf") '" oor--ooO\O\o-\O-O'\ 0\0 C"i-=6--:6o"ir'1ociei 0000 I I I I I I .- "<!"-- "<!"- I OO-\O-OOOOOC"f1N-\D -r<')NOOlnr-OO\'oOOtr'lO\O\\Dr""I.000.r.q--rtir-rrlOO Nr-OO".762. Its total output would rise by $271 . ("")-00 V \D tr) r<') 0 r- "ct q-V)-O-O\OI()('f')V)\O <f) I \0 - '"I 00 tries..0 \ 0'\ N r. There are several reasons why this bias occurs.~ C'! C"~ 0V)~r-1ociNrr). Base Metals..oor----r-Q'\("'1"'"-N~VO tr)OO-:.e. The most obvious one is that the imposition of tariffs causes the Canadian dollar to be worth more than it otherwise would (the price of foreign exchange is lower).. dustries tend to be heavy exporters. one would expect a priori that the tariff structure would favour aluminum smelting and refining and. Table 10 shows how the total outputs of the six processing industries would change if the tariff structure were not in existence.0\ C"I - o II U o<f) N 0\ 0 OO~ I I \CVO\Nr-Vr-OOMOO\C . this would mean that the bias against smelting and refining of the minerals procured from Canadian sources would be even greater than indicated. This may arise because the outputs of this industry are used to a great extent as inputs into industries which are favoured by the tariff structure such as certain manufacturing industries. Therefore. Since the inputs into aluminum smelting and refining are imported.t\O\OO\Q'\OONt- 0-\01- N (". Unfortunately. It is also of some interest to see how the tariff structure affects the incentive to process minerals in Canada rather than export them in the raw form. On the other hand. Coal rises by 163 percent or 0\ r- 000\00 -O\Dr- N'ON\OO\r-NDNNO'o >< f-o "I I r-("'100tr)\O-\CO\r-. is heavily discriminated against by the tariff. From table lOwe see that the removal of tariffs causes the wage-rental ratio to fall indicating that the tariff structure favours labourintensive industries relative to capital-intensive ones..!': .¢V v> <ll tr) V)O\O ~~~ 6M6~Nrt1~o06--:"": 6~\Cir--: I V1 O"<!"OO 0 I '"oo I ~ u o E E N . thus reducing demand. the mining industries may be purchasers of intermediate inputs which are subject to tariff protection such as manufactured products.s. First stage processing.!': vi. Smelting and Refining.c--:6r. and Quarries and Sandpits.29 percent) if the tariffs were removed.6 million (13. The purpose of the tariff is to protect import competing industries.cooo' C"INNN 70 000 ("I")("t') $86..IMNO'IOOC'INMr-OO <f) -NQ'\\Cf'f')DMlr)O\-r<") r-MO\r-Q'\('""-IOOD'o. Also.:--:6V) N V " l .i~r-."OO--OO('<'j Vi r-q-- o o . and less so of Other Non-Metal Mines."" \0 "<!"r-- . if so. This increases the price of inputs and causes a reduction in mining production.. but at the same time it will discriminate against exporting industries.) N r"") \0 C") 'r: <f) \0 C'l- r-("'. The other processing industries hampered by the tariff are Iron and Steel and Metal Casting and Extruding n. appear to be only mildly discriminated against and the reason is by no means obvious . the presence of the tariff structure would assist the industry by making imports cheaper via a lower price of foreign exchange (assuming that the imports of bauxite themselves were not subjected to a tari ff). These.1 --:V:"":~ N r- o ~~r--:o6-.\C \0\0 "¢ "¢ 0\\0 l/"'l r. There may be other less direct ways in which the tariff structure affects mining production. This is particularly true of Coal. Iron. Copper and Alloy Rolling is also slightly favoured perhaps for much the same reason.. Metal Fabricating appears to be heavily favoured by the tariff structure. this industry includes aluminum smelting and refining which does not process minerals obtained from Canadian mining industries and we have no way of knowing the extent to which the above result is due to the processing of aluminum as opposed to domestically produced minerals. the fall of the price of foreign exchange due to the tariff increases the price of exports to foreigners.N ('f') \O\ONO o (")or---.:tr-\O ("')\000\0 00 0\ r--OO". The effect on the other 71 .. "" VOOV/ DNl00 r.. ("") \D N \1') r-V1Vn ..

tariffs are not the only distortion in the model. " • While the results are not shown in table 10. however. World Trade and Payments (Boston: Little. only one has an output change of over I percent. This would indicate that commodity taxes discriminate neither in favour of nor against processing of minerals in Canada.51 percent respectively when the taxes are removed). We find that the removal of the tariff causes automobile production to rise by 24 percent. Canada would be exploiting whatever monopoly power it had in world markets. The index falls by . and Other Petroleum Products. The commodity tax structure does have considerable impact on resource allocation outside the mining and mineral processing sectors. The final significant result to be discussed is the effect on the welfare index of removing tariffs. However. the effect on none of these industries is very significant. including Machinery. W. Jones. Tobacco. Tobacco. it is possible that imposing tariffs can make the former better off at the expense of the latter. the wage-rental ratio. since we are concerned with the welfare of Canadians only and not that of the rest of the world. There are. All others have output changes of less than 2 percent. 1973). tending to discriminate against first processing but to favour later stages of procesSing. A similar result holds for the processing industries. We also have commodity taxes and corporate taxes.. This is a rather surprising result given the usual economic arguments in favour of free trade and against the distorting effects of tariffs. Other Non-Metallic Mineral Products has an output rise of 1. Textiles. It is a well-known proposition in the theory of second best that the removal of some distortions in an economy with other distortions need not improve economic efficiency or welfare. As would be expected the industries which are favoured significantly are manufacturing industries. Our computations indicated that commodity taxes strongly discriminated against the following industries: Petroleum and Gas Wells. Coal. in favour of other manufacturing industries. and Miscellaneous Manufacturing. Furniture. 4 The idea is that imposing a tariff and reducing Canadian demand for imports would induce foreign sellers to re4. a surprisingly large figure. at least three explanations of this result (all of which occur simultaneously).08 percent respectively). However. the overall effect of the tariff structure on processing is a mixed bag. to a lesser extent. Gypsum.57 percent and 1. ing and processing industries. They include the following: Alcohol. Gold. Of those discriminated against only Iron and Coal have output changes of over I percent when the taxes are removed (1. In addition. we can briefly indicate the effects of the tariff structure on other industries. Most manufacturing industries are neither strongly favoured nor discriminated against. On the other hand there are some manufacturing industries which are not favoured by the tariff structure. Non-Metallic Mineral Products. This is known as the optimal tariff argument in the theory of international trade. See R. Alcoholic Beverages. 72 duce the price of imports. Communications. and the welfare index are shown in the second column of table 10. Rubber. The case of Motor Vehicles is obviously a result of the auto pact of 1965 with the USA. Finally.E. As is obvious from these results. These are to be expected because of the extremely large specific excise taxes levied on products of these industries. Other Transport Equipment. and 3. Overall. Salt. The mining industries favoured most are Uranium. So strong is the protection in the case of Alcohol that the removal of the tariff forces the industry out of business altogether. the tariff structure tends to discriminate against primary industries and some manufacturing industries. Consider first the twelve mining industries.7 percent). Utilities. one would have to conclude that the commodity tax structure has little effect on the output of mining industries relative to the rest of the economy. and Lime. Finally. Caves and R.processing industry. Distortions due to Commodity Taxes The influence of the existing commodity tax distortions on outputs in the min.48 percent. First. and Other Non-Metal Mines (whose output falls by 2. but not to have a strong bias either towards or against the service industries. Those industries favoured include all the service industries and. is insignificant.15 percent when the tax is removed. the commodity tax structure has a considerably different effect on resource allocation than does the tariff structure. These are all industries which are provided with strong tariff protection. 2. Overall. thus improving Canada's terms of trade. Therefore. the rise in welfare from imposing the tariff may in part reflect a shift of labour into wage industries which are favoured by the tariff. the tax structure discriminated mildly against Motor Vehicles and Pipeline Transport. Both of these may be explained by the induced effects of the excise tax on gasoline. Motor Vehicles.75 percent indicating that the tariff increases welfare slightly rather than decreasing it. Electrical Appliances. Second.60 percent. the exchange rate. The tariffs and taxes may provide offsetting distorting effects on resource allocation so that removing one may cause resource allocation to go further away from the optimum. The reduction in the wage-rental ratio when the commodity tax is eliminated indicates that the tax favours labour-intensive commodities slightly over 73 . Other Electrical Products. and Other Petroleum and Coal Products. Petroleum and Gas Wells tend to be moderately discriminated against by the tariff structure (8. Three are slightly favoured and three are slightly discriminated against by commodity taxes. Brown and Company. The commodity tax structure slightly favours all of them except Iron. and Construction.

First of all. is directly contrary to the purpose of the tariff structure. This indicates that the tax structure tends to disfavour exporting and importcompeting industries. Finally. favouring import-using industries. especially later stage processing.they have a relatively high rate of tax. The magnitude of the discriminatory effect on the mining industries is small except for Other Non-Metal Mines (18. and Finance. especially in manufacturing industries. as indicated in the previous section.e. thereby making imports less expensive. Although the revisions cannot be examined in detail here. The conclusion that mining is discriminated against by both the capital taxes and the total tax/tariff structure therefore holds with equal or greater force at present. that the commodity tax structure is partially offsetting the intended results of the tariff structure. thus indirectly feeling the impact of taxes on these other industries (especially manufacturing).especially Alcohol. they are relatively capital-intensive so that the price of capital figures strongly in the price of outputs of these industries. Of more interest is the effect of the commodity tax structure on the exchange rate.2 percent (i.5 We are therefore not surprised to find that the capital tax discriminates against all mining industries except two. see below. The price of foreign exchange falls by 2. Therefore.. Distortions due to Capital Taxes From table 10 we see the effects of eliminating capital tax distortions. Those industries favoured most strongly are Petroleum and Gas Wells. the capital tax appears to work at cross-purposes to the tariff. However. Raw material inputs are imported into Canada and therefore their price depends upon the exchange rate.I capital-intensive ones. Finally.36 percent). its output faIling by 47 percent when the tax is removed. however. like the commodity tax structure. Iron is much less affected (4 percent) when the tax is removed. Recall as well that capital taxes here include not only the federal and provincial corporation income taxes but also provincial mining taxes which.g. This.fining. The effect of the capital tax structure on the exchange rate is of considerable interest. but sl ightly above the national average of all industries (14 percent). Gypsum and Salt Mines are slightly affected (3. Along with Petroleum and Gas Wells. these two industries had the lowest capital tax rates of all industries in 1966. reflecting a decline in outputs of more labour-intensive industries (such as services). Any factor inducing a rise in returns on capital has a fairly large influence on price and thus on demand. However. that these capital tax rates were computed using 1966 data. affect only the mining industries. and the results of the analysis would clearly be modified as a result. Motor Vehicles. Iron and Coal. It appears. Since that year. this effect may be due mainly to the inclusion of aluminum smelting and refining. The reason for these two findings is not hard to uncover. But. Therefore. have considerable significance in explaining why the processing industries are discriminated against. major revisions of the taxation structure have taken place at both federal and provincial levels. On the other hand. Other Petroleum Products. even with the mining taxes included. The least affected is Smelting and Re. the capital tax itself discriminates against import-using industries such as aluminum smelting and refining and this may account for at least part of the discrimination against Smelting and Refining. removal of the commodity taxes causes the welfare index to rise by almost I percent. of course. for example. undoubtedly unintentionally. observe from table II that the capital tax rates in mining industries tend to be relatively low compared with that of the manufacturing industries. thus removing much of the desired impact of tariff protection. 74 dustries is not difficult to explain. This exchange rate effect may.6 percent indicating a very strong bias against export and import-competing industries. There are tariff and commodity tax distortions and also differential wage rates over industries.26 percent and 4. manufacturing). Other industries discriminated against by the capital tax include most manufacturing industries . from the point of view 01' the resource industries. Note. therefore. the first processing stage. Furthermore. First. the mineral processing industries are all discriminated against moderately strongly. this welfare change measure takes into consideration some distortions other than that of the commodity taxes. their main thrust can be deduced. Chemicals. and Miscellaneous Manufacturing. Coal is particularly sensitive. Labour becomes more abundant when the tax is removed.42 percent). Second. The net effect of the changes is that in most jurisdictions the mining industries are more heavily taxed than in 1966. The reasons why other processing industries are discriminated against are similar to those of the mining industries . This is the 'deadweight loss' of the commodity tax structure. and Real Estate. mining industries purchase significant inputs from industries which are heavily taxed and are used as inputs into heavily taxed ones.. whose output rises 3 percent when the tax distortion is removed. they have higher capital tax rates than the national average. and they use and are used in industries which are fairly heavily taxed (e. the discrimination against exports is important. and Base Metal and Asbestos Mines are less so (2 percent and 2. Insurance. exchange rate effects may be important: . of course. they are fairly capitalintensive. the Canadian dollar appreciates) when the commodity tax distortions are eliminated. the Canadian dollar appreciates by 13.3 percent). When the capital tax is removed the price of foreign exchange falls. In addition. When the tax is removed. not too much significance may be attached to this deadweight loss measure. capital tax rates are still lower than those in some other industries. The tendency of the capital tax to discriminate against all other mining in5. Most service industries arc favoured as is 75 . This indicates that. Machinery.

Coal Mines. indicating that the size of deadweight losses is small. COllstruction. it appears that the mining industry is fairly strongly discouraged by the set of taxes and tariffs levied by federal and provincial levels of government in 1966. Although the exact amounts of change are of course subject to the exogenous parameters read into the model. The effect on manufacturing is mainly due to tariff protection. Utilities. Iron (15 percent).4 percent respectively). given the existence of other tax/tariff distortions and the labour market imperfections. Petroleum Products. labour's share of GNP before and after elimination of the capital tax stays steady at 46 percent indicating that capital bears almost all of the burden of the tax. For one. 6 The welfare index fell by 0. Agriculture. the tax/tariff distortions tend to discriminate against primary industries and most manufacturing industries. We have already discussed some of the reasons for these above. The results as they affect mining and processing are presented in the final columns of table 10. Other significantly affected mining industries include Base Metals (16 percent). The Effects of Eliminating All Tax and Tariff Distortions "~. and Pipeline Transport. Harberger. In any case. much of the same pattern arises for the processing industries. Those industries favoured by the distortions substantially include Alcohol (which has strong tariff protection more than offsetting tax discrimination). wh()~ . Furthermore. Other Non-Metal Mines increase by 47 percent when the distortions are removed. all incrca'e significantly when the distortions are removed (by 15. Textiles (due also to the tariff). This is not surprising in view of the fact that each of the distortions in itself favours labour. Motor Vehicles. Quarries and Sandpits (II percent). Coal Products. Machinery. for example. Copper and Alloy Rolling and Other Non-Metallic Mineral Products are affected only to a minor extent. and some manufacturing industries are favoured by the distortions. the wage rate differentials amongst industries are reflected in the welfare change. the reader is referred to A. for it shows that the commodity and corporate tax structures more than offset the protective influence of the tariff structure.1 percent. only Cement is affected insignificantly. Other Electrical Products. For a more technical discussion of this point. and Metal Casting alld Extmding lI. Furniture. Also. Chemicals. This must be due to a combination of two influences. Iron alld Steel. and Fishing are discriminated against to a lesser extent.6. This implies that overall taxes and tariffs tend to favour labourintensive industries relative to capital-intensive ones. 12.~ Each of the previous cases considered only the effects of eliminating one of the three types of tax/tariff distortions. Insurance. The remaining two industries. Water Transport. Other industries whose outputs rise by a sizeable amount when all taxi tariff distortions are removed are: Petroleum and Gas Wells.C. But I/Ieltill~ (llId R(/illillg. The influence of the tax/tariff structure on trade is indicated by the fall in the exchange rate by 9. the magnitude of this welfare change is fairly small. To the extent that the tarin I~ ~UI posed to foster manufacturing industries. that the capital tax works strongly in favour of labour-intensive industries and against capital-intensive ones. Tariff policy is unwittingly being completely frustrated by other policy instruments. Finally. Effects of Corporationtncome Tax (Detroit: Wayne State University Press. Owner-Occupied Housing. In fact.s. The wage-rental ratio falls by 15 percent when the tax/tariff distortions are eliminated. Broadly speaking. Therefore. 'The Efficiency Effects of Taxes on Income from Capital'.5 percent. Th is overall appreciation of the Canadian currency is of some interest for policy analysis. Since we have not included any disutility of 76 77 AgriCIIlture. The interesting finding to emerge from these results is that the tax/tariff structure discriminates against all mining industries. The two other pieces of information obtained from table 10 are the effect on the wage-rental ratio and on the welfare index. Other Transport Equipment. The wage-rental ratio falls by 12. Most of these industries are in the manufacturing sector. In these cases. The others are increased by about 5 percent or more. especially on many manufacturing industries. some by substantial amounts.58 percent when the tax was removed.45 percent w hen all taxes and tariffs are removed. indicating that the capital tax actually caused welfare to rise. All are discriminated against by the tax and tariff distortions except for Metal F(lhricatill~. as expected.5 percent indicating. EleClrical Appliances. Krzyzniak. Aluminllm Rolling and Extruding. in M.e. Gypsum (15 percent). and 11. In general all service industries. and Asbestos (II percent). it is due mainly to the detrimental effects of both tariffs and capital taxes. mostly due to the detrimental effect of the tariff. 1966). There must be a net flow of workers from low wage industries to high wage industries due to the distortions. and Finance. our sensitivity analyses have indicated that results obtained are of the same order of magnitude as those given above. rises by 140 percent when the distortions are removed. ed. the burden of the tariff is being to some extent passed on to foreigners via improved Canadian terms of trade (the 'optimal tariff' argument). To obtain an idea of how the entire tax/tariff structure affects resource allocation and particularly the mining industry we have computed a general equilibrium solution with all commodity and capital tax and tariff distortions removed. oUlpUI lall~ by over 7 percenl when the distortions arc removed. Communications. Of the remainder. Forestry. this again illustrates how the corporate tax is working at cross purposes. and many are linked to mining industries (forward or backward). . the existence of the tax/tariff structure surprisingly increases welfare by almost I percent. and Real Estate. .

a prime denotes a transpose. Notation 7. corporation income tax. Resource Allocation and Welfare' .. .-i = world elasticity of supply of M i Ei = quantity of exports of i lJi = world elasticity of demand for E i EP. open economy with fixed factor supplies and some fixed distortions (taxes. S = exchange rate (price of foreign exchange) IJ. = proportion of income spent on Qi Y = total income from all sources M. static.S. Ihe ben '!'il:. 'Taxation. competitive.C. The Role of DireCT and Indirect Taxes in the Federal Revel/LIe SysTem (Princeton: Princeton University Press. a dot between two matrices refers to the operation of multiplying each element of one by the corresponding element of the other. for the deadweight loss of the U.S. wage rate differences over industries). See. for a measure of the deadweight loss due to the income tax and Harberger. A. The model is a general equilibrium.j = I . 25-75. neoclassical. Variables are listed in the order in which they appear. in National Bureau of Economic Research and the Brookings Institution. MP = shift parameters in world export and import functions ti] = commodity tax rate of Xi] (ad valorem) 78 79 . for example. i. For all the variables listed below.56) Xi = total output in i = labour used in i Li Ki = capital used in i Xli = intermed iate input flows from j into i AJi = physical input-output coefficient from j to i Pi = producer price of i' s output tf = final demand commodity tax rate on i (ad valorem) Qi = domestic final demand for i E. In any case. . Unsubscripted variables are vectors or matrices as the case may be. economy. This is consistent with studies of the deadweight loss of taxes in the U.working in high wage industries in our wl'llare ind 'X. pp. = quantity of imports of i tf" = rate of tariff on M. a circumflex represents a diagonal matrix. tariffs. 'Efficiency Effects of Taxes on Income from Capital'. the corresponding vector or matrix uses the same notation with the subscript(s) deleted. the deadweighl loss 01" Ihe distortions introduced by the entire structure 01" laxcs and tarilfs is 01" insignil"icant size compared with the amount of attention lhat is devoted to it in the literature.. all unprimed vectors are column vectors. Harberger. 1964).7 Appendix I The General Equilibrium Model The mathematical model and computational method are derived in this appendix.01 Ih' 1<1'/ tariffs structure may be overestimaled.j = subscripts used to denote industries (i .

Note that price elasticities (8Qi/8{Pi( I +tf)}' Pie I +t[)/Qi) are minus one and income elasticities (8Qi/8Y' Y/Qi) are one. Q i. the unit factor demands Q i and k i may be solved as a function of the wage-rental ratio under the assumptions of profit-max imizing and competitive behaviour. Demand Functions Pie I +t[)Qi = Ei Y where Ei is a parameter. The explicit functional forms and the computational solution will be outlined for the fixed intermediate coefficient version. . -00 < 'Y/i :S. . AK i) = Afj(Lj. EP. parameters of fi. 8 fi/K i iv) 8 2 fi/8L i8K j > 0 <0 (I inear homogeneous) (positive marginal products) (diminishing marginal products) (complementarity of L i and KJ (Below specific functional forms are given to fi). E i. Qi. V i) the model may be solved for the endogenous variables (Wj. Given the functional forms of ( I ). tf.C (10) properties of fi: i) fi(ALj. 80 (2) The above system of equations describes the economy with which we are deal ing.]-1 (w' Q + r(1 +tk)'k) On the right hand s ide of (6) all items are parameters except w. The solution is: X = [I-A]-l (Q+E-M) The Fixed Coefficient Version This is the standard input-output relation referred to in the text of chapter 3. and k. 'Y/i.Pi J These are 56 equations. For example. The solution in matrix notation is: P = [I-(A'(I +t»' . This reduction is explained now. 8fi/8K i > 0 2 2 2 2 iii) 8 fi/8L j . Market Clearingfor Labour L=~QiXi= Q'X (8) (9) Note that market clearing for capital automatically holds by Walras' Law (see below).M. M i. (3). 1'. Ei. and 1').~Pi( I -It') M. Lj. 0 Pricing Relations P = ~ Aji (I +t. Xj.\. and (4) and given the exogenous data (A ij. tim. tf. consider the Cobb-Douglas technology: (II ) 81 . the system is reduced to a single equation (market clearing for labour) in terms of a single variable (the wage rate).) pj + Wi Qi + (5) r( I +tr) k. Market Clearingfor OutpllfS Xi = ~ Aij X j J + Qi + E.£Xi {3j Aj 7Tj W gi 'Yji U B T Import Supply and Export Demand Functions M i = M? (Pi( I +t!")/s)"i = wage rate in i = labour use per unit of output in i (= Li/X J = rental rate on capital = capital tax rate in i (based on gross surplus) = capital used per unit of output in i (= Ki/X i) = other value added in i (as a proportion of Pi) = unit matrix = aggregate supply of labour = net capital inflow from foreign sources = exponent on L i in Cobb-Douglas production functions = exponent on K j in Cobb-Douglas production functions = shift parameter in production functions = profit in i = economy wide average wage rate = ratio of industry wage to w (= wi/w) = exponent on Xji in Cobb-Douglas production function = utility = shift parameter in util ity function = true index (3) (4) E i = EP(Pi/ s) '1i where 0 :S. K i) = Xji/Aji Market Clearing/or Foreign Exchange ~PIE. Y. The variations required for the variable coefficient version will be given in the next section. Analytically. k i . Xji. Kj. (2). + Y. J-ti < 00. Production Functions ( I) Xi = fi(Lj.. (6) Q . tij. They may be solved for the Pi in terms of all other variables. MP. From the properties of the production functions f"i. Pi. (7) These 56 equations may be solved for the Xi in terms of all other variables. = . J-tj. K i) ii) afi/aLj.

E i and Mi. E. Income for expenditures is derived from several sources . and corporate tax revenues. tax revenues. the rental on capital and arbitrarily set it equal to unity. The expression for total expenditure is then: Y = wL + rK + (tm.r(l+tn}~.l wlP. Fortunately. p )' Q + (tk·k)' X + C ( 17) I. j. other value-added. Next. final demand tax revenues. More generally. and net capital inflows. Y in (18) is a function of wand r alone.) (8. {3i W (14) Y _ A similar expression may be derived for k j. S.(w. r/( I -8. p )' + [(Y·p)' + p'(t·A) ( 13) I + (tk·k)'] [I-A]-I} Y E/p·(1 +t f) -~ Divide (12) by (13). - wL+rK+(tm·p)'M+[(Y·p)'+p'(t·A)+(tk·k)'] [I-A]-I(E-M)+C 1-[(t'·p)'+{(Y·p)'+p'(t·A)+(tk·k)'}[I-A] lE/p·(I+t') 18) ( Careful inspection of equation (I 8) will show that it is a function of w. Then (20) becomes a single equation in a single unknown w which can be solved iteratively on a computer. so must prices Pi be functions of the wage-rental ratios by (6). Y/. Pi> Xu. tariff revenues. and M are all functions of wand r. substituting (2) into (8) for Q and the resulting expression into (9) we obtain: (20) Since Q . All other variables on the right hand side are either exogenous parameters or functions of these variables. Having obtained the equilibrium solution for w. Competitive firms maximize profits subject to given prices where profits 7Ti= PiXi . Total payments to labour and capital are lWiLi and lrK j • We assume that the labour markets are competitive but wage rates differ amongst industries due to nonpecuniary differences in working conditions. Pi are determined and (19) becomes a nonIinear equation in the exchange rates.l pj (I +tji) Xji. t. other value-added. equation (20) is one equation in the two unknowns wand r. -Pi+ (I -81)K./r(I+tI'») (15) ki=kj(w. or numeraire.p)' M + (Y·p)' X + p' (t·A) X + (If. The optimizing j first order conditions on L i and K i when (II) is used for Xi are: a-X Pi~=Wj ( 12) Y = wL + rK + (tm. any linear homogeneous production function will give unit factor requirements as a function of the factor price ratio alone. E. Substituting (3) and (4) in (10) gives: ( 19) For any given values of wand r. This being so. To solve for the exchange rate s as a function of wand r we use the balance of payments constraint (10). Solving for Y yields: j + (1-8. intermediate tax revenues. we assume that the differences in wage rates over industries are in fixed proportion such that wtfWj is constant for all i and j. Qj. Y. p. Equation (20) can therefore be solved for w in terms of r. We have also used the CES production function in our computations. t m . We can define an economy-wide weighted average wage rate w such that lWiLj = wL. and the exchange rate s by (3) and (4). Also. Each industry wage rate will be linearly related to the economy-wide wage rate.=L/X=A-1{ 1 I l I a. Total payments to labour will then be denoted by wL. We can treat as our monetary unit of account. tariff revenues. V). we derive an explicit expression for total expenditures. that is all that is required. Substituting market clearing conditions for Xj. [8 IL. Further.where the right-hand terms represent respectively payments to labour. r.=Q. payments to capital. Finally.payments to labour and capital.-PlrIIPI The unit labour demand is: Q. (2)./(J+Pjl] I/P. = 82 Ail [8. t k ./r(l+tn) (16) Since Q i and k i are functions of the wage-rental ratios alone. Wi = giW. the absolute price level being indeterminate. (8).p)' M + [(Y·p)' (3 x Pi ~= r( 1+1/') + p' (l·A) + (tk·k)'] ([I-A]-I(E-M») + C + ((tf. E j and M i are functions of w. It is a well-known property of general equilibrium systems that they can only be solved for relative prices. t f . and demand functions for Qi. solve for K i in terms of L i and substitute in (II) to yield: Q. into (17) gives: where (Xi + f3i = I. I We write: Q.t. r. 83 .r(1 +tn K i . A general equilibrium solution may be obtained for any set of exogeneous parameters read into the system (A. Li> K i. M i. This equation is solved iteratively on a computer so that we may treat s as a function of wand r alone in our analytical discussion. it is a simple matter to work backwards and obtain the general equilibrium values for all other endogenous variables (Xj. E i. where gi is a constant. Y).wiLj . It may be written: Xi = A.

it was stated that the proportionate change in welfare is measured as a weighted average of the proportionate changes in final demands: D. 1 log (I +t) . However.Y I) WIQ i PI = EI I D. Proceeding as before with profit maximization.)"I(r( I +1r>~I)IJI] l1(pj( 1+ lji)/Yjifii J (25) where D i is the square-bracketed expression and is a function of wand r./r( I +1 .!p.O. I Yu + ai + f3i = J I . integrating (30) yields (28) for a discrete change. Since the exponents Yu are also the values of input i as a proportion of the value of output j in the Cobb-Douglas production technology. as before. with constant returns. way to proceed is to derive what is called a "true quantity index' from (29). the truc quantity index corresponding to utility functions (29) is: T = nO E' Il101"1 = U'/U" (31) " T may be easily computed from the observed values of Qi and QP. the pricing equations reduce to: + r(l+tr)k i (I .8. and :y log.)/Yji)Yji (22) (23) j Prices. are the sum of payments to primary and intermediate inputs. When intermediate inputs are used in variable proportions.k) '-~. Unit demands for labour and capi tal are now functions of w. r. The solution to Pi from (25) is obtained by converting the equations to the log-linear form and solving for log p. Using (5). now the Au used in (8) are no longer fixed but depend upon input prices. The change in utility from a change in final demands is found by first differentiating the natural logarithm of (29) to give: (24) cI(ln U) = kEi cI(ln 01) (30) J Substitution of (22) and (23) into (24) and simplification yields: Pi = [Aj'(wi/a. unit factor demands are derived to be: Q 1= Aj'(ai/wi)I-<:'i (r(1 +tr)/. Q'[I-A']-'(w Q +rK) = wL = rK Note that the rearrangement of (8) gives: X'[I-A'] (27) 85 = 0' (33) . Using superscripts 0 and I to refer to the control and shock equilibrium values respcctively. It is well-known that these demand functions are consistent with a consumer utility function of the Cobb-Douglas form: U = Bno~i j k 1= A j '(. For simpl icity. 01 (28) "This welfare change measure is implied by the demand functions (2). but equivalent. some amendments are required. prices are a function of wand r. Equations (17) through (20) remain exactly as before. and all intermediate input prices.8i)~i l1(pj(1 +tj. Production functions are assumed to be Cobb-Douglas in all inputs: The Welfare Change Measure (21 ) In the text of chapter 3. or. The above system was solved for the case in which intermediate inputs were used in fixed proportions.1 log 1] (26) :y log (I +t) is the vector of elements IYji log J (I +tji). The prices thus computed are used in the mode! exactly as in the fixed coefficient version.The Variable Coefficient Version These valucs of AI) arc us 'd as the input-output coefficients in thc solution of (20).( I +lu) 84 Since all Ej are constant. The budget constraint of final demands is: O'p = wL + rK (32) Substituting for p from (6). maximizing this utility function with respect to a budget constraint will yield the demand function (2). in vector notation: log P = [I -a']-'[Iog 0 + where a is the matrix of Yu. An alternate. we do so in a closed economy without taxes.~Yji) ( I . Walras'Law It is a straightforward matter to prove that labour market clearing implies capital market clearing in this model. we get a simple expression for Au as follows Au = Yu p.U U This is the Cobb-Douglas form where.y is the vector of elements fYji log Yji' From (26).(wi/al)T)1 l1(pj( I +tji)/Yji)Yjl =k (29) That is.

86 87 . were found by dividing the tax payment on these flows by the corresponding intermediate flow net of the tax.Appendix II Therefore. Tariff and Tax Rates Data on total tariff payments and total commodity tax payments on all transactions were obtained from Structural Analysis Division of Statistics Canada. These tables are unpublished. . In order to obtain this result we have had to choose our parameter values for production. 3 tjk. factor payments. and payments to primary factors of production are obtained from the 1966 input-output tables prepared for us by Statistics Canada. As will be discussed below.The adaptation of the input-output tables to our model and our choice of exogenous data is the subject of this appendix. As mentioned in chapter 3. This same proof may be extended to open economies with taxes with no difficulty. tariff rates l tf" were obtained by dividing tariff payments for each industry by the corresponding flow of imports 2 (gross of tariff). That is to say. They simply give these tax payments as a percentage of gross surplus. These flows of imports as well as those of final demand. til. 3. intermediate uses. substituting into (33) X' (w ~ +rK) = wK+rK The Choice and Sources of Data (34) From market clearing for labour we know that X' ~ = L Therefore. they were divided by I. To convert these to capital tax rates. demand. the control solution yields the same total outputs. tax payments out of corporate income include both corporation income taxes of the federal government and the provinces and provincial mining and logging taxes. The capital tax rates we calculate are therefore purely fictitious and do not represent legal tax rates. and world trade functions very carefully. Tax payments out of corporation income were obtained from Corporation Financial Statistics /966 published by the Dominion Bureau of Statistics. The same notation is used here as in appendix I. These were converted to rates by dividing the tax payment by the flow to which it was applied. final demands. the demand for capital equals the supply. Thus. 2. Exports were not subject to the final demand tax. and factor allocations as in the actual economy. t{. X'k = K That is. total outputs. intermediate inputs. Final demand tax rates.. were obtained by dividing tax payments on final demand by domestic final demands net of the tax for each industry. Tax rates on intermediate flows. the data are chosen in such a way as to make the control general equilibrium solution exactly replicate the 1966 Canadian economy. The methods for choosing them and the sources of the other raw data used are outl ined in the following sections. from (34).

gross surplus from the input-output tables net of the tax payments. 4 These
capital tax rates are therefore calculated as a proportion of payments to capital
net of tax but gross of depreciation. Ideall y, we would Iike to net out depreciation from payments to capital since tax rates are actually calculated net of
depreciation and also since it is net-of-depreciation rental on capital which is
equalized over industries. Since we lack data on true depreciation by industry
we are forced to assume that true depreciation rates are the same over all
industry groups. 5 Then, competition equalizes the gross-of-depreciation rental
rate on capital as well as the net and it makes no difference whether tax rates are
applied on the gross or net basis.
The tariff and tax rates thus calculated are listed in table I I.
Factor Supplies
We have assumed the total supplies of labour and capital to be exogenously
given. Labour supply is measured in man-years. The average annual employment by industry was obtained from Structural Analysis Division of Statistics
Canada. 6 Capital would appear to pose grave problems since we have no
available measures of the stock of physical capital. However, by choosing the
rental on capital to be our unit of account or numeraire we are able to overcome
this problem. The total return to capital (net of tax) is rK j for industry i. Since r
= I by our price normalization, the total return to capital is identically the
stock of capital services K j . Data on the return to capital net of tax comes from
subtracting capital tax payments from the 'surplus' item in the input-output
tables. The aggregate supplies of labour and capital are then simply the sum of
their uses in each industry. Note that these supplies of labour and capital
include only that used in the private sector. It is assumed that for all the
experiments we are conducting the public sector's demand for labour and
capital is unchanging and all reallocations take place within the private sector.
Thus, the government is assumed not to behave in the same way as profitmaximizing private industries. Nonetheless, the government's final demands
4. Forexample. in the first industry. agriculture. the gross surplus rromthe input-output tables is
$56.7 millions. Total capital taxes paid are obtained rromCrJlporatiol/ Financial Statistics
/966 and are $4.8 millions. Therefore. the capital tax rate is calculated as 4.8/(56.7-4.8) =

0.0923.
5. Alternatively we might have atlempted to obtain rough estimates of rates of depreciation over
industries by either looking at rates of depreciation for tax purposes or by considering relative
service lives of different capital goods. The former method yields unreliable depreciation rates
and the laller involves aggregation problems for the industry classification we are using.
Nunetheless this is clearly a source of data that one would like to improve upon.
6. Notice that labour and capital employment in this model includes only that used in private
sector industries. Public sector use of these primary inputs is assumed exogenously fixed and
has no innuence on the various solutions to this model.

88

Table 11

Tax and Tariff Rates, by Industry

Industry
I. Agriculture
Forestry
Fishing and Trapping
Base Metal and Other Metal Mines
Uranium Mines

2.
3.
4.
5.
6.
7.
8.
9.
10.

Iron Mines
Gold Mines
Coal Mines
Petroleum and Gas Wells
Asbestos Mines

II. Gypsum Mines
12. Salt Mines
13. Other Non-Metal Mines
14. Quarries and Sandpits
15. Services Incidental to Mining

16. Food and Feed
17. Alcoholic Beverages
18. Tobacco
19. Rubber
20. Leather, Textiles, and Clothing

Final
Demand
Capital Commodity
Tax Rate Tax Rate

0.0923
0.1154
0.0625
0.1523
0.1523
0.0464
0.2628
0.0500
0.0476
0.2311
0.2311
0.2311
0.2311
0.1738
0.0705

Tariff
Rate

0.0003
0.0004
0.0000
0.0374
0.0001
0.0060
0.0016
0.0015
0.0151
0.0245
-0.0531
0.0005
0.0422
0.0001
0.0052
0.0126
0.2334
1.6095
0.0905
0.0975
0.0629
0.0986
0.0879
0.0029
0.0718

0.0326
0.0002
0.0029
0.0045
0.0427
0.0001
0.0034
0.0229
0.0174
0.0007
0.0040
0.0713
0.0059
0.0078
0.0653
0.0577
0.3238
0.2423
0.1151
0.1097
0.0525
0.1567
0.1028
0.0552
0.0595

21.
22.
23.
24.
25.

Wood
Furniture
Pulp and Paper
Printing and Publishing
Iron and Steel

0.2548
0.3810
0.3399
0.2792
0.2041
0.1478
0.1995
0.2393
0.2700
0.2546

26.
27.
28.
29.
30.

Smelting and Refining
Aluminum Rolling and Extruding
Copper and Alloy Rolling
Metal Casting and Extruding n.e.s.
Metal Fabricating

0.2423
0.2423
0.2423
0.2423
0.2859

0.0479
0.1829
-0.0044
0.1027
0.0901

0.0274
0.0525
0.0794
0.0752
0.1182

31.
32.
33.
34.
35.

Machinery
Motor Vehicles
Other Transport Equipment
Electrical Appliances
Other Electrical Products

0.2460
0.3366
0.2186
0.2329
0.2863

0.0756
0.1072
0.0937
0.0924
0.1144

0.0686
0.0505
0.0559
0.1453
0.1164

89

Table II

(continued)

Industry

Final
Demand
Capital Commodity
Tax Rate Tax Rate

trltrlM\O'<t
0000 [-0 trl-

("I"')OO",,¢_........-l

Cement
Lime
Other Non-Metallic Mineral Products
Petroleum Refining
Other Petroleum and Coal Products

0.2095
0.1473
0.1473
0.1290
0.2051

0.0321
0.0103
0.0766
0.6240
0.0405

0.0263
0.0732
0.0755
0.0517
0.0250

4 I.
42.
43.
44.
45.

Chemicals
Miscellaneous Manufacturing
Construction
Water Transport
Rajl Transport

0.2959
0.2575
0.1698
0.1536
0.1666

0.0941
0.0942
0.0000
0.0000
0.0007

0.0659
0.1059
0.0000
0.0000
0.0000

46.
47.
48.
49.
50.

Truck Transport
Pipeline Transport
Other Transport and Storage
Communications
Utilities

0.0000
0.0000
0.0000
0.0068
0.0150

0.0000
0.0000
0.0000
0.0615
0.0024

51.
52.
53.
54.
55.

Wholesale and Retail Trade
Owner-Occupied Housing
Finance, Insurance, and Real Estate
Education, Hospitals, and Health
Other Services

0.1098
0.1722
0.1037
0.2309
0.2032
0.2084
0.0000
0.0822
0.0000
0.1116

0.0013
0.0000
0.0000
0.0000
0.0129
0.0000

0.0940
0.0000
0.0000
0.0000
0.0000
0.0000

0.0000

I

Tariff
Rate

36.
37.
38.
39.
40.

56. Dummy

'<tNOINM
- N trl

I

..

for industry outputs are characterized by the same sort of demand functions as
all other final demands.
In table 12 we record the labour uses and capital uses by industry and in
the aggregate. In addition, for later reference we include in this table total
payments to labour, average annual wage rates, and other value-added by
industry.

0Ll

.5
..c:

o

o
-0
C

o:l

Demand Parameters
The only exogenous parameters required for demand functions are the shares of
total expenditure devoted to each industry's output, Ej. These shares are obtained from the input-output tables as follows. All types of final demand by
domestic residents are aggregated into one column vector of final demand (Qi
= C j + G j + Ii)' These are gross of imports and final demand taxes. The sum

90

.....:N~..q:v)

91

~~oOo\o

......

-......:N~-.:iv)"'r-:OO~O
...... ("'0..1

'"
N

Table 12

(continued)

Industry

21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.

Wood
Furniture
Pulp and Paper
Printing and Publishing
Iron and Steel
Smelting and Refining
Aluminum Rolling and Extruding
Copper and Alloy Rolling
Metal Casting and Extruding n.e.s.
Metal Fabricating
Machinery
Motor Vehicles
Other Transport Equipment
Electrical Appliances
Other Electrical Products
Cement
Lime
Other Non-Metallic Mineral Products
Petroleum Refining
Other Petroleum and Coal Products

Labour
Use
(Man- Years)

Wage
Payments
($ Thousand)

Average
Wage
($)

Capital
Use
($ Thousand)

92003
43128
114369
82209
64428
33618
5076
4185
4076
143342
75417
83006
63376
20289
103228
3992
876
47507
10671
572

464121
203257
765734
494429
437994
234456
32833
28206
22919
869672
487050
598194
413522
114526
595963
29699
5147
278365
95427
3500

5045
4713
6695
6014
6798
6974
6468
6740
5623
6067
6458
7207
6525
5645
5773
7440
5876
5859
8943
6119

115277
49399
450456
111967
274247
106793
0
15792
13845
276630
200599
192106
66806
21642
192756
56686
653
144722
67218
3805

Other Value
Added
($ Thousand)

20623
12121
53023
34337
15830
19110
1933
1193
831
28204
13575
24394
7910
4306
13321
3195
154
15372
10720
451

,
'"
f,,;J

Table 12

(concluded)

Industry

41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.

Chemicals
Miscellaneous Manufacturing
Construction
Water Transport
Rail Transport
Truck Transport
Pipeline Transport
Other Transport and Storage
Communications
Utilities
Wholesale and Retail Trade
Owner-Occupied Housing
Finance, Insurance, and Real Estate
Education, Hospitals, and Health
Other Services
Dummy

TOTAL

Labour
Use
(Man- Years)

72963
67800
510997
37290
i 18548
90361
2868
91303
142097
48333
995888
0
262278
49023
486394
0
4750382

Wage
Payments
($ Thousand)

483955
340393
3587146
234592
770723
408866
21536
524766
774354
328534
4282400
0
1651923
211043
1873318
0
25479084

Average
Wage
($)

6633
5021
7020
6291
6501
4525
7509
5748
5449
6797
4300
0
6298
4305
3851
0
5364

Capital
Use
($ Thousand)

318561
117327
533599
77874
291083
179058
189125
253124
479174
715140
1256212
1358834
1704300
34686
594488
0
13411097

Other Value
Added
($ Thousand)

32656
15922
667618
-6204
- 129615
127449
11751
87794
-60897
44780
944821
1566601
1214276
555507
1016299
478149
9325191

\0 . 6. Agriculture Forestry Fishing and Trapping Base Metal and Other Metal Mines Uranium Mines 2.0217 0.0003 0.j:>. 12.0789 0. Exports and Imports. Gypsum Mines Salt Mines Other Non-Metal Mines Quarries and Sandpits Services Incidental to Mining Food and Feed Alcoholic Beverages Tobacco Rubber Leather. 17. 8. 4.0008 0.0001 0. by Industry Industry I. 3. 9.0011 0. 20.0168 0.0004 0. 13. 7. 15. Final Demand Shares.0002 0.0021 0.0148 0.0431 Exports ($ Thousand) Imports ($ Thousand) 1247993 48425 55665 220201 28191 294529 93023 14494 450517 163101 8817 2597 49182 6172 800 530978 137118 36233 24620 124467 344843 24975 33053 56362 44 57489 762 172329 437049 2664 850 3610 60059 25502 5012 485061 95598 13831 126980 774939 .0003 0. 18.0014 0. 16. Textiles. and Clothing Final Demand ($ Thousand) 911642 61463 6359 13027 14565 19799 4389 41303 73376 2893 -584 11084 12717 13933 114001 4233253 528286 307824 168282 2135995 Final Demand Shares 0. 5. Iron Mines Gold Mines Coal Mines Petroleum and Gas Wells 10.0001 0. Table 13 Final Demands.0034 0.0002 0. Asbestos Mines 11.0002 0. 14.0000 0.0001 -0. 19.

and R. B. 225-51.J. since prices turn out to be normalized to unity in the control general equilibrium. the exponents ai and f3i are simply the share of labour and capital in value-added respecti vely. we cannot observe Xi in the data available.8 in addition to the scale parameters Aj. The values of Ej are simply the proportions of final demand for each industry to the aggregate (Q. j Final demand by industry and the values of Ej are recorded in Table 13. Rather. 7 These come directly from the input-output tables. see the seminal piece by K. 43. or PiXi. In the CES case. Minhas. Tilis table also includes the control values of exports and net-of-tariff imports which. total output values. Because of the compl ication of 'other value-added' in the input-output tables. 96 97 .of this column is total final demand or total domestic expenditure as defined by equation 17. we have output measured in value terms. Review oj Economics and Statistics. as indicated below.Cobb-Douglas and Constant Elasticity of Substitution (CES). These functions are written: Cobb-Douglas: (35) C£S: (36) In the Cobb-Douglas case. Note that f3i is the share of capital inclusive of capital tax payments. these shares are shares of labour and capital in the total payments to labour and capital. However.B. 'Capital-Labour Substitution and Economic Efficiency'. 1961. The latter is related to the elasticity of substitution between L i and K i as follows: Pi = (I -cri)/cri (38) 7. we need values for the 'distribution' parameter 6 i and the 'substitution' parameter Pi. are used to obtain the values of EP and Mr "'Production Functions - Fixed Coefficient Version For production functions relating primary factors of production to total output we have limited ourselves to two types .M. Other value-added is assumed to bear a constant ratio to the output price.S./IQj). The values of the scale parameters Ai are obtained by using observed industry values of labour and capital use. Arrow. Solow. PiXj = Xi and the coefficients Ai may be readily calculated. appendix I. 8. The Constant Elasticity of Substitution production function is well-known in the economics literature. Chenery. The formula for calculating Ai is: (37) While we have observed values for L i and K i (see table 12) and cxact valucs for ai and f3i. vol. pp. For a complete discussion of its properties. H. and the above-calculated labour and capital shares.

See H. the scale parameter Ai is calculated using the actual amounts of labour.7086 15.584940 6 7 8 9 10 13.677516 0.811045 0.560049 0.699672 0.531122 0.188765 0. we have used an elasticity of substitution of unity which corresponds to the Cobb-Douglas case. may be used as the physical output Xi since all Pi = I in the control general equilibrium.214343 21 22 23 24 25 16. f3i) may be calculated using: 0i = [ai(L.1389 39.339142 0.3258 0.428725 0. Given that actual resource allocations in the control solution correspond exactly to the real world. and value added in each industry.153830 0.3179 0.274867 0. 'NonlinearTwo-Stage Least Squares Estimation ofCES Production Functions Appl iedto the Canadian Manufacturing Industries.6404 14.492613 0.225720 0. 1970.000000 0.0223 7.1180 0.589788 0.290290 31 32 33 34 35 16.000000 0.7273 19. 1926-39. Only Ai and ai are shown since f3i is simply I-ai' To show why all prices turn out to be unity with the above choice of data.533725 0.395561 0.710042 0. 1946-67'.8114 13.1612 8.293803 9.2628 10.785657 0.4723 9. intermediate demands.632284 0.604439 11 12 13 14 15 7./Ki)Pij/[ 1.848220 0.6197 7.al + ai(Li/K i)Pi] (40) Finally.640311 0.835513 0.221843 0.359689 0.481320 0.7550 13. From the little sensitivity experimentation we performed.3124 5. and outputs per industry according to: Ai = Xi [Oi Li Pi + Cobb-Douglas Industry Production Function Parameters (39) (l-oi)KtijIIPi (41) Once again.346663 0.485355 0.367716 0. The choice of ai or a-i and Pi ensures the correct shares going to labour and capital. 2.223362 0.410212 0.where <Tj.8251 8. pp. the elasticity of substitution is defined by: (TI = - din (w/r) din (K/L) Table 14 Tsurumi has estimated elasticities of substitution for some Canadian manufacturing industries.776638 0. vol. 52. final demands.2210 30. 98 99 . Tsurumi.150411 0.660858 0. For any value of <Ti and hence Pi chosen. the value of output.289958 0.188955 0. Rel'ielV oj Economics and Srarisrics. capital.514645 0.5767 18. If time and resources had permitted.507387 0.6626 14.571275 0. we may demonstrate analytically that all industry prices will of necessity be unity in the control general equilibrium.709710 0.361373 0.7098 21. 200-207.699544 0.758292 0.4702 0. The production function parameters calculated as above are really in value terms (PiAj) Industry Number ~ Scale Parameter Labour Parameter Capital Parameter I 2 3 4 5 12.4663 15.468878 0. The use of input-output data ensures the correct proportions amongst all total outputs. This is one area in which further empirical work would be of obvious benefit to researchers.578356 0. it appears as if the results are very insensitive to values of <Ti chosen within reasonable ranges.7746 0. 9 Where no estimates are available.415060 0.0686 35.518680 0.3818 9. no.0061 16.439951 26 27 28 29 30 40. And the correct scale of outputs (and inputs) is ensured by the use of actual industry total outputs in computing production function scale parameters. pjXj.466275 0.164487 0.322484 0.421644 0.849589 0.151780 0. The values of parameters for the Cobb-Douglas case are shown in Table 14.0839 0.8450 0.725133 0.300456 0. we could have experimented with different values of <Ti.774280 0.846170 0.241708 16 17 18 19 20 24.653337 0.6273 21. the distribution parameter which is consistent with the observed factor shares (aj.300328 0.811235 0.6917 5.2667 14.5925 3.778157 0.9778 13.3803 17. note first that the computed control general equilibrium will exactly replicate resource allocation of the actual economy.8056 15. The use of actual labour and capital by industry in calculating production function scale parameters and the use of real world wage rate differentials (gJg j ) as outlined below ensures the correct proportionate allocation of factors to each industry.638627 1.706197 0.

567153 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 15. and f3i are simply the shares of Xjj.723096 0. we may experiment with different values as time and computing resources permit.088542 0.626378 0.3303 21. PiXj.6455 2. the latter are actually calculated as ~ Jpi and kJPi.9579 13.302376 0. The scale parameters Ai are calculated according to: since they were found by using PiXi instead of X i in (37) and (41).872965 0. Once again we must use the values of output.327064 0.557023 0. . However.6297 2. the exponents )'jj.2675 11.460340 0. Therefore PiXi = Xi and pjXji = Xji in the control solution.432362 0. ai.697624 0.148219 0. Since these value scale parameters are used in computing unit labour and capital requirements from (15) and (16).276904 0. PjX ji .694157 0. Therefore.5104 0.672936 0.1123 4.527525 0.697754 0.472475 0.442977 0.302246 0.6352 62.3546 10.141156 0. and the values of intermediate inputs.723687 0.347419 0.1285 23.000000 0.7182 0. Also.3545 0. We have no reliable estimates of the elasticity of demand for exports by industry or the elasticity of supply of imports.276313 0. labour. Comparing (44) with (42) indicates that all prices equal un ity. Wi ~ JPi and r( I +tik)k.000000 Industry Number 1= [1-A'-V]-I(W' ~/p + r(1 Hk)k/p) where I is now the unit vector. L i.738293 0. Our normal ization procedure is therefore equivalent to choosing physical units of all industry outputs so their prices are unity in the control equilibrium.261707 1.305843 9. and capital calculated as a proportion of value of total output net of other value-added. In the Cobb-Douglas form.260771 0.739229 0.567638 0.373622 0.432847 0.858844 0.000000 0.2813 10. Since all coefficients in an industry must sum to unity: I = ~aji + Wi Q dPi + r( I+tr)/Pi + Vi Variable Coefficient Case The parameters of production functions (21) are relatively straightforward to obtain.a scale parameter (M? and and elasticity (l-ti and 7)i).Table 14 Converting (43) to vector notation gives: (continued) Scale Parameter Labour Parameter Capital Parameter 36 37 38 39 40 6. the matrix of aij. 101 (47) .0000 0. They are therefore the value input-output coefficients for intermediate goods.0670 9.911458 0. Import Supply and Export Demand Functions The world trade functions (3) and (4) involve two sorts of parameters .3442 7.7795 12. the pricing equation (6) actually computed is: P=[I-A'-V]-'(w' ~ +r(l+tk)'k) (44) (46) EP = Ej (43) where M i and E i are the actual values of imports and exports in Table 13./Pi are the wage and surplUS coefficients in the input-output tables.539660 0.127035 0. since value input-output coefficients aij are actually used in place of physical input-output coefficients Aij.. Since all prices are unity in the control situation and since it may also be shown that the exchange rate s is unity the values for MP and EP from (3) and (4) are simply: En (42) where A. in (45).9187 11. it can be demonstrated in the same way as above that all industry prices turn out to be unity in the control general equilibrium. and K i in total output (net of other value-added). Production Function Parameters - Ai = XlII J J 100 xjyt Lr i K?i)-' (45) using actual values for all inputs and outputs.9514 13.. Given any values for I-ti and 7)i the scale parameters MP and EP are calculated from the observed M i and E i in the control situation. is gross of commodity tax payments. When the computed general equilibrium replicates the real world.851781 0.652581 0.2531 16.4986 9.000000 0.

At that point. the gt will satisfy the above properties and this will be the shock solution. that is. In the fixed coefficient version. au = au (I +tu) for all i. We can treat Wj as being linearly related to w such that: W. First. The average annual wage rate in an industry in the control situation is computed to conform with the observed average labour usage in that industry and the total wage bill. . Wj.L.. Table 15 shows the input-output coefficients calculated net of tax (Au or au). W. 103 . In table 15 the rows represent the input requirements per unit of output for each industry. all i.. account must be taken of the fact that average wage rates differ amongst industries... The procedure is repeated until F comes sufficiently close to unity./Wj = constant. we will find in general The input-output flows made available by Statistics Canada are easily converted to coefficients by dividing each element by the appropriate column total. Then all gi are amended by dividing each one by the calculated F. maintain the constancy of wi/Wj (or gj/gj) before and after the shock. Thus.. We assume that the proportionate difference in average wage rates amongst industries is a constant. This will13e demonstrated in the next section. i = I. append ix I. In the computational procedure. new Au's are calculated for each w iteration.Inter-Industry Wage Rate Differences In order to have the control solution reproduce the real world. these g.)/(W /L) i = I. it turns out that when parameters of the model are chosen so as to exactly repl icate the actual economy. (This will retain the constancy of g. To use these value coefficients as if they were physical ones is val id only if the ratio of all com mod ity prices is un ity (pJpj = I. With all prices unity.*)/L = I 102 (Ig. Since the control equilibrium replicates the real world. From (51) it follows that IWiLi = IgjwL j = wL as required. In the variable coefficient case the value input-output coefficients gross of commodity tax payments are exponents ajj in the production function equation 21 . Wi = WJL. .. j. since new Pi'S are calculated for each new w within the iterative procedure. F is calculated as above. w.56 (51) where the wage bills and labour usages are those of the real world (table 12)..they give the number of dollars of input per dollar of output. are the appropriate ones to use.*)/L = F# I To correct the gi values we iterate them as follows. in addition.56 (50) where all gi are chosen such that wJWj are as observed and IWiLj = wL for all general equilibrium allocations. Input-Output Coefficients (49) w = W/L where the star refers to'the shock equilibrium. These differences are assumed to be due to non-pecuniary differences in working conditions in different industries. Labour itself remains homogeneous and mobile amongst industries at the given wage rate differentials../gj') Another general equilibrium is calculated along with a new F.. the wage bills and labour usages will change so that the gi as defined by the control values of W. physical coefficients Au are fixed and related to the net-of-tax value coefficients by Au = aupJpj where au is the value of input i used per dollar of output j when com mod ity tax payments have been eliminated from the input values. a new general equilibrium is computed using the old gj. . . Next. all industry prices turn out to be unity.. These coefficients are in value terms . we want to ensure that in the shock solution. Thus. The physical input-output coefficients are variables and are computed according to equation 27 using the price of the general equilibrium solution. where W is the aggregate wage bill for the economy. or (Igi"L. and L j will not in general ensure that IWiLj = wL in the shock equilibrium.56 (48) These industry wage rates will differ from the economy-wide average wage rate. The values of gi used in computing the control general equilibrium are obtained from: gl = (W JL. the value input-output coefficients computed net of commodity tax payments may be used as the physical input-output coefficients Au in all computations for the fixed coefficient case. Fortunately. These may easily be converted to gross-of-tax value coefficients au using the intermediate tax rates t u. Using the old g. We have introduced an iterative procedure for amending the gj so as to satisfy this condition and.=gjW j = I. When the equilibrium is shocked. That is. j).

000042 0.000068 0.000138 0.001462 0.000217 0.000003 0.000081 0.000000 0.000004 0.000000 0.0 .000001 0.000003 0.000015 0.000020 0.001472 0.000001 0.000040 0.000412 0.000000 0.000003 0.000000 0.000023 0.000180 0.008473 0.000000 0.000002 0.000020 0.000004 0.000000 0.0001 0.000004 0.000018 0.000000 0.000001 0.000038 0.000001 0.000030 0.000330 0.000000 0.000068 0.000255 0.000026 0.000006 0.000157 0.000343 0.007585 0.000000 0.000010 0.000004 0.000000 0.000018 1 ? 1 4 "i A 7 8 9 10 11 12 13 14 IS lA 17 18 19 1'0 21 '2? 21 24 2"i 26 27 28 29 30 31 32 33 34 35 0 Table 15 Ul 4 3 0.000000 0.000011 O.000000 0.000e66 0.000021 0.000037 0.000009 0.000048 0.030196 0.000176 0.000785 0.007525 0.000262 0.000277 0.000051 0.000014 0.000000 0.000 12 0.000105 0.00058A 0.I>- Table 15 Inpllt-Output Coefficients .000000 0.000088 0.000301 0.00041~ .000000 0.000010 0.000603 0.000028 0.000010 0.000000 0.000002 0.013080 0.000025 0.000111 0.000193 0.000002 0.000670 0.000000 0.002445 0.000000 0.000000 0.000164 0.000000 0.000000 0.000000 0.000000 0.000018 0.000000 0.003230 0.000006 0.000043 0.000080 0.000018 0.000000 0.002400 0.000093 0.000000 0.000126 0.000000 0.000018 0.005761 0.000001 0.009294 0.131909 0.000397 0.000000 0.000002 0.002284 0.003026 0.000023 0.000565 0.000056 0.000077 0.000064 0.000000 0.000035 0.000002 0.000054 0.000000 0.000118 0.000039 0.000008 0.000000 O.000000 0.001923 0.000157 0.010474 0.000050 0.000000 0.000000 0.000077 0.000028 0.OOOOO? 0.00001 0.OOOOIS 0.000001 0.000087.000103 0.000010 0.0000?1 0.001044 0.00009 0.071222 0.000129 0.000279 0.000296 0.000001 0.000706 0.00 38 0.000001 0.000172 0.000003 0.000000 0.001144 0.034442 0.000019 0.000401 0.000032 8 9 10 0.000001 0.000029 0.000270 0.000000 0.000000 0.000052 0.000033 0.000011 0.000000 0.000745 0.000441' 0.000000 0.000319 0.000013 0.0002 3 0.000031 6 5 0.000127 0.000425 0.000010 0.000026 0.001118 0.000882 0.000004 0.000122 0.000001 O~OOOOOO 6 0.000187 0.000000 0.000001 0.000000 0.372762 0.000000 0.000004 O.000000 0.003847 0.000005 0.000070 0.000000 0.000008 0.000004 0.039389 0.000627 0.000000 0.000001 0.000008 0.003948 0.000033 0.000008 0.000040 0.000021 0.000000 0.000000 0.050383 0.000006 0.000000 0.000212 0.000000 0.001528 3 0.000000 0.010950 0.000000 0.000002 0.oooolb 0.000041 0.000019 00.000068 0.000300 " (continued) INDUSTRY 36 37 38 39 40 41 °4? 43 44 45 4A 47 48 49 50 51 52 51 54 5<.000189 0.000442 0.000010 0.000083 0.000295 0.000000 0.003069 0.000000 0.260933 0.000000 0.001417 0.000000 0.000003 0.000021 0.005720 0.000000 0.001181 0.000013 0.000143 0.00122S 0.000060 0.000004 0.000084 0.000007 0.000667 0.000000 0.000000 0.000024 0.000032 0.002916 0.000004 0.006172 0.000215 0.000527 0.000000 0.000001 0.000047 0.000018 0.000011 0.000047 0.000029 0.000001 0.000207 0.000159 0.000000 0.000006 0.001208 0.006119 0.000556 0.000000 0.005b~9 0.000214 0.000002 0.000005 0.000142 0.00n021 O~OOOOOO 0~000009 0.000000 0.0000b4 0.000000 0.000012 0.000000 0.000000 0.000073 0.000002 0.000000 0.000486 0.003871 0.000111 0.000017 0.007270 0.000003 0.000170 0.000345 0.000107 0.628181 0.000136 0.0000 0.000019 0.000000 0.000064 0.005166 0.000001 0.000000 0.000942 0.000000 0.000003 0.000045 0./966 I INDUSTRY 0.OOOOOA 0.000015 0.000000 0.000064 0.000038 0.000000 0.000000 0.000021 0.000103 0.002177 0.000200 0.000104 0.006~47 0.000001 0.00006 0.000030 0.000043 0.000009 0.000001 0.27484A 0.000008 0.000070 0.000000 0.000214 0.000003 0.0.007376 0.000080 0.000007 0.000054 0.000000 0.000002 0.000021 0.005946 0.000059 0.000 0 0.000151 0.000012 0.000006 0.032134 0.000359 0.000022 0.000907 1 O.000055 0.000000 0.000004 0.000003 0.000369 0.000046 0.000491 0.000306 00.000001 0.000000 0.001060 0.000040 0.000091 0.094595 0.000000 0.020187 0.000106 0.000358 0.000773 0.000001 O.000038 0.000000 0.001158 0.000807 0.072632 0.000000 0.000081 0.000000 0.028816 0.000000 0.000082 0.000004 0.000000 0.000000 0.000035 0.000002 0.000005 0.000000 0.006090 o.000008 0.000002 0.000001 0.000 4 0.000028 0.000341 0.001316 0.000266 0.006967 0.000000 0.000005 0.000089 0.000294 0.000018 0.006318 0.004199 0.001608 0.000038 0.000019 0.000000 0.000000 0.000022 0.000104 0.000277 0.000000 0.000000 0.000381 0~000002 0.000000 0.000005 o.000086 0.000207 0.000286 5 0.000050 0.001021 0.000000 0.000494 0.000019 0.000639 0.000010 0.000012 0.006240 0.000000 0.000011 0.004734 9 10 0.000417 0.000040 0.000000 0.000804 0.000105 0.004596 0.000000 0.000002 0.000000 0.000005 0.000004 0.001044 0.000042 0.000018 0.000000 0.000756 0.000004 0.000036 0.000190 0.000000 0.000354 0.003616 0~000251 0.000004 0.000000 0.000014 0.000000 0.003286 0.000027 0.00012A 0.000357 0.000001 0.000017 0.000382 0.0045S7 0.000177 4 0.000245 0.000000 0.000014 0.000000 0.32668A 0.000312 0.000610 0.000058 0.000030 0.000342 0.000000 0.000023 0.OOOOOA 0.000337 0.000848 0.000031 0.000004 0.000000 0.000001 0.00044S 0.oooo~~ 0.000900 0.000184 0.000031 0.000464 0.000~55 0.000000 0.000044 0.000009 0.000002 0.000012 0.0000 2 8 7 0.000004 0.000647 0.000319 0.000050 0.000004 0.000012 0.000094 0.000057 0.000447 0.000000 0.000218 0.000000 0.000000 0.00002S 0.000017 0.000000 0. 56 2 2 0.000000 0.000000 0.OOOOO? 6 7 0.000650 0.000002 0.000001 0.078737 0.000014 0.000006 0.000002 0.000207 0.000000 0.600401 0.000031 0.000000 0.001452 0.000000 0.000018 0.000000 0.019391 0.000010 0.00006A 0.000084 0.000515 0.000000 0.

000006 0.000011 0.000079 0.000006 0.000108 0.000023 0.001683 0.000004 0.000366 0.000000 0.000004 0.000012 0.000006 0.001106 0.000000 0.00~176 0.000 4 0.000007 0.000008 0.000207 0.000793 0.OOOOOn 0.000000 0.000311 0.000019 0.OOOOIA 0.000024 0.00 453 0.000018 0.000004 0.000454 0.000630 0.000059 0~000027 0.000000 0.002455 0.000161 0.000034 0.005779 0.00 959 0.000011 0.000001 0.000000 0.0014P4 0.000075 0.001234 0.003971 0.021254 0.000021 0.000026 0. 0.000016 0.000000 0.000018 0.001276 0.000001 0.000000 0.000000 0.000151 0.000070 0.000014 0.o 0\ Table 15 (continued) INDUSTRY 1 ? 3 4 C.000005 0.000004 0.000000 0.000000 0.000000 0.000001 0.000001 0.000000 O.007654 0.000002 0.000291 0.00 933 0.001422 0.000000 0.000000 0.000713 0.014824 0.02~}49 0.000000 0.0014~9 0.000000 8:8888?8 0.000099 0.000000 0.001~~0 0.000000 0.000062 0.002298 0.000073 0.000000 0.000000 0.000226 0.000008 0.000002 0.000050 0.368696 0.001272 0.003705 0.001005 0.031450 0.00000 0.000018 0.000000 0.000000 0.000133 0.00 6 000 0.000003 0.000489 0.000262 0.001295 0.000042 0.001424 0.c.000007 0.000044 0.00 970 0.000000 0.000024 0.000000 0.000045 0.025549 0.001427 0.000017 0.000043 0.000332 0.006620 .000017 0.000000 0.000466 0.000000 0.000011 0.017164 0.000 6 0.000003 0.000168 0.000087 0.000000 0.000053 0.00n061 0.000954 0.000036 0.OOOOOS 0.OOOOOC.000hA7 0.000029 6 0.034676 0.000005 0.002401 0.000109 0.000000 0.000477 0.000004 0.000819 0.000025 0.000178 0.000839 0.000021 0.000042 0.000112 0.000000 0.000000 0.000061 0.000262 0.000156 0.080000 0.005718 0.023005 0.000000 0.0000 0.000332 0.000000 0.0000}5 0.000141 0.000000 0.000135 0.000598 0.000004 0.I II INDUSTRY 3h 37 3A 39 40 41 4? 41 44 4c.000381 0.000000 0.000000 0.004503 0.000021 0.000016 0.000007 0.028360 0.002287 0.007409 0.000019 0.000005 0.000016 0.000000 0. f> 7 0.000001 0.000017 0.009536 0.022752 0.014632 0. 5h II 0.001297 0.000013 0.00000 20 0.000238 0.000017 0.000000 0.000093 0.000002 0.000121 0.000024 0.000400 0.000000 0.0 3126 19 0~00~002 0.000000 0.000000 0.000146 0.000000 0.000039 0.000045 0.006904 8:88888R O.000000 0.000061 0.000000 0.000010 0.000000 O.000010 0.000395 14 15 16 17 18 0.000015 0.000000 0.000006 0.003858 0.000000 0.000836 0.000007 0.000000 0.000019 0.000019 0.000034 0.000000 O.000247 0.0002 4 0.000094 0.001186 0.000007 0.000020 0.000184 O.000000 0. 4f> 47 48 49 50 51 5? 53 54 c.000184 0.005453 0.000000 0.000000 0.000191 0.000246 0.000018 0.000074 0.000000 0.000395 0.000007 0.000002 0.000000 0.000000 0.020945 0.000000 0.004439 0.014405 0.000010 0.000000 0.000000 O.002059 0.000236 0.000030 0.005443 0.001002 0.000006 0.000010 0.003616 0.000206 0.000866 0.000672 0.000787 0~005475 0.OOOOOA 0.0017A4 0.000002 0.013896 0.000021 0.010132 0.000000 8:888566 0.001015 0.00003 0.000022 0.000060 0.000007 0.000414 0.OOOOO~ 23 24 2c.000068 0.003842 0.004535 0.000024 0.022717 0.000153 0.086006 0.000024 0.001127 0.006686 0.061065 0.000028 0.000503 0.000001 0.000000 0.000726 0.000043 0.000006 0.000000 0.000000 0.000016 0.001027 0.0003f>4 0.000445 0.000001 0.000003 0.000479 0.000147 0.000144 0.000007 0.00S577 0.000000 O.000000 . 2f> 27 2A 29 30 31 32 33 34 35 Table 15 (continued) A 9 II Is 14 JC.009473 0.000000 0.004483 0.000204 0.000054 0.OOOOO? 0.000000 0.000154 0.000005 0.002A20 0.000g~6 0.000000 0.000000 0.000009 0.00?~37 0.000000 0.004498 8:888~~§ 8:881~~f 0.001085 0.000120 0.000008 0.000024 0.000153 0.010772 0.000697 0.000007 0.000058 0.000002 0.000005 0.0 0000 0.000002 0.000036 0.000000 0.000069 0.002810 0.000000 0.000021 0.000018 0.000000 0.000009 0.oonooo 0.000223 0.003459 0.000000 0.000208 0.000006 0.000138 0.000005 0.154524 0.000019 0.000000 0.00002A 0.000146 0.000004 0.002151 0.000241 0.000057 0.006105 0.000009 0.005175 0.000073 0.000078 0.002286 0.000014 0.OOOOIS 12 0.OOOOOh 0.000000 0.000156 0.000453 0.000205 0.002754 0.000008 0.000088 0.021070 0.000006 0.000069 0.001048 0.000000 0.001136 0.000000 0.000015 0.000000 0.000255 0.000166 0.000008 0.036618 0.042068 0.000062 0.000267 0.000043 0.001124 0.000029 0.008227 0.000005 0.000003 0.000000 0.000000 0.002377 0.000000 0.00n015 0.002716 0.000053 0.002226 0.000341 0.000536 0.000000 O.000604 6 0.000651 0.001085 0.000014 0.000684 0.000~8~ 0.000014 0.00 747 0.000043 0.000030 0.000384 0.001380 O.000004 0.007903 0.000460 0.000000 0.000000 10 -.000054 0.000005 0.000009 0.160223 0.000132 0.000009 0.01h539 0.000444 0.002655 0.000100 0.000407 0.000892 0.000000 0.000 46 0.OOOOOA 0.000507 0.000000 0.000005 0.000005 0.116360 0.079645 0. 16 17 lA 19 20 71 '2? 0 12 0.000000 0.000007 0.000114 0.000034 0.004302 0.000059 0.000041 0.010377 0.000000 0.000000 0.000067 8:88~8~~ 8:R88!8~ R:8~gg~g 8:888~6g 8:8888~S 13 0.001045 0.015697 0.000009 0.000100 0.000494 0.000000 0.000020 o.000006 0.000557 0.000064 0.000015 0.000017 0.00 28 0.000001 0.000087 0.000003 0.000000 0.085614 0.000000 O.000044 13 14 15 16 17 0.000007 18 19 20 0.001219 0.229145 0.000208 0.000012 0.000017 0.000014 0.000864 0.000058 0.000899 0.000441 0.000128 0.000001 0.002121 0.000017 0.001343 0.000000 O..009316 0.000019 0.013323 0.000000 0.001130 0.003748 0.00 024 0.OOOOOA 0.000007 0.000012 0.000011 0.000001 0.000020 0.000019 0.000006 8.000007 0.018557 0.000008 0.000000 0.000200 0.000410 0.000075 0.000002 0.000000 0.000009 0.00002A 0.

00 087 0.000092 0.0008 00 0.000180 0.800051 0.000279 0.030945 0.000066 0.0 224 0.000029 0.000017 0.000024 0.031447 0.869 0.000003 0.000255 0.000384 0.000058 0.006526 0.00309 • 5 93 0.64 044 0.000174 0.000000 0.000000 0.000083 0.003818 0.009789 0.000172 0.081729 0.0000h9 0.0024 0.000000 0.000923 0.000003 0.0029~~ 0.017413 0.000147 0.56 O.0088 00 0.002107 0.000153 0.000441 0.000403 0.000 88 0.000002 0.031 0 8.000000 0.000Q17 0.069196 0.000000 8:38n~gt 8:888b~~ 8:8b~~I9 8:888a7~ 8:886£~~ 8:8b~1~2 8:88886~ 8:888hn8 8:8888~~ 0.000009 0.000087 0.00+.001340 0.000280 0.000000 0.016418 0.000007 0.000742 0.0 0639 0.002963 0.000515 0.007272 0.00391h 0458 0.000025 0.000993 0.000137 0.000000 0.002928 0.007894 0.000044 0.000792 0 0.000163 0.027151 0.031009 0.0133~0 0.000884 0.017087.000005 0.001595 0.062913 0.000222 0.002348 0.142876 0.006492 0.000018 0.000000 0.000004 0.000000 0.0 3888 0.08 0116 8.033481 0.000000 0.000000 0.000208 0.000530 0.001361 0.000019 0.147514 0.004 6 o.005868 0. 02 03 0.000000 0.0040 0.000000 0.000427 30 0.000319 0.0044 1 0.011342 0.000213 8.000041 0.003870 0.0061j7 0.0008 00 8 0.000336 0.040475 0.001475 0.000159 0.000241 0.000 00 0.000100 0.000168 0.000170 0.000000 0.014706 0..0 5253 0.000995 0.000034 0.001166 00 i 0 0 8:888g~~ 8:8888t~ 8:885~'~ 8:8881~~ 8:8£g~~~ 8:8883~g 0 0.000468 0.001866 0.000500 0.008279 0.8 • 00 888 8:88888g 0.000245 0.0 0 6 0.000 00 0.000804 0.000112 0.00335 0.000000 0.025117 0.000698 0.003987 0.0 898 8:888b+~ 8:88~686 0.0 8tg 16 0.098697 0.000000 0.016774 0.00042R 0.000219 0.000078 0.000309 67 0.000904 0.002240 0.002434 0.000000 0.000390 0.000784 0.000176 0.005347 0.000012 0.001049 0.000057 0.000395 0.000564 0.00 251 .009312 0.000413 0.000007 O.008367 0.041485 0.001714 0.038959 .000124 0.000026 0.000145 0.006166 0.00 090 0.016787 0.001678 8:8b.000770 0.031357 0.000000 0.000000 0.000030 0.000000 0.209853 0.000068 0.000698 0.000000 0.000056 0.000000 0.001407 0.094470 0.000126 0.000016 0.002493 0.000350 0.000252 0.000000 0.000065 0.000453 0.000000 0.000709 0.000025 0.000273 0.000889 0.002596 0.000280 0.000361 0.000001 0.000102 0.000011 0.000000 0.000395 0.000013 0.019536 0.007525 0.900097 0. 0 0.007729 0.001386 0.07569~ 0.8l~ 0.677 0.003038 0.013075 0.000001 0.000468 0.000131 0.Og5198 0.000011 0.041700 0.000451 0.001132 0.000000 0.004380 0.003234 0.001329 0.013058 0.000000 0.020694 0.051780 0.003134 0.000205 0. 82.024269 0.015593 0.000155 0.000013 0.000808 0.000103 0.000877 0.000099 0.001404 0.000000 0.000800 0.000000 0.005572 0.000153 0.000024 0.002992 0.009173 0.001321 0.018473 0.526132 0.000588 0.006560 0. 23 24 ?5 26 27 28 29 30 31 j~ 34 35 o \0 Table 15 3~ 40 41 42 43 44 45 46 47 48 49 50 51 5? ~2 55 56 22 23 24 25 26 0.002567 0.08050~ .00 57 0.000003 0.003265 0.000000 0.008 011 0.001611 0.0015 9 0.009281 0.008 035 0.000887 0.001549 0.001278 0.000031 0.003396 8:888888 0.000031 0.000080 0.000020 0.0002~6 0.000006 0.057545 0.000002 0.000018 0.000176 0.000150 0.011525 0.0 17 7 0.006662 0.00002A 0.000882 0.006451 0.000220 0.000522 0.00680A 0.0 4615 0.009612 0.0 1893 • 02535 0.110528 0.000014 0.000000 0.00 88 360 0.000000 0.001712 0.80 0.000051 0.000146 0.000046 0.001560 0.000022 0.000968 0.000036 0.000350 0.000877 0.000258 0. 8650 0.000000 0.000237 0.000738 0.015853 0.005907 0.000397 0.84~375 0.000000 056 8.000069 0.000000 0.000157 0.000969 0.00011? 0.021346 0.011644 0.000109 0.002544 0.010660 0.000722 0.000142 0.000000 4 0·888g O.000118 0.011057 0.007.000001 0.002609 6 27 28 21 29 0.00 583 0.000 66 0.000008 0.noo 1 0.000108 0.000119 0.019000 0.031126 " (continued) INDUSTRY 36 37 21 22 23 24 25 26 27 28 29 0.000685 0.003897 0.00265? 0.030273 0.000000 0.0 41 0 0.002~5~ 0.000104 0.000829 0.028059 0.000224 0.00 818 0.000187 0.066824 30 0.000909 0.000068 0.26 131 0.000003 0.000949 0.000012 0.088504 0.000007 0.000036 0.020284 0.000619 0.01193? 0.000161 0.000006 0.000 73 0.014596 0. 00000 0.800038 0.000051 0.002979 0.000000 0.000170 0.000355 0.004388 0.00890~ 0.0~15i3 0.013609 0.000954 0.003313 0.002551 0.0805~7 0. 00000 0.027055 0.101984 0.017575 0.071744 0.008623 0.08 0000 0.000 0.010360 0.0000 9 0.000000 0.004722 0.000955 0.000022 0.000158 0.000046 0.019000 0.000058 0.008389 0.00 124 0.00 1 0.088007 0.000027 0.000056 0.003386 0.00 0 0.00 04 0.007983 0..0 Table 15 (continued) 00 INDUSTRY 1 ? 3 4 .000000 0.00.009255 0.007968 0.002947 0.802094 0.001199 0.013242 0.002913 0.41422.000397 0.000418 0.000594 0.000003 0.000000 0.002267 8.000000 0.88 O.08~209 0.001231 0.00671~ O.000009 0.000255 0.000000 0.000 5 0.000000 0.000611 0.00068~ 0.001518 0.000077 0.000259 0.000408 0.000013 0.003993 0.004909 0.291814 0.000060 0.000001 0.000423 0.000 52 0.004395 0.00808~ 0.08 00 0.00454~ 8. 0.032253 0.000024 0.130539 0.000000 00 8.007613 0.000 0.000547 0.000175 0.0 00 0.003305 0.000000 0. 6 7 8 9 10 11 I? 13 t~ 16 17 18 19 20 21 27.002857 0.000~02 0.000442 0. 0.001122 0.OOOII~ 0.000000 0.000282 0.0083+~ 0.00002€> o.800000 0.017898 0.008000 0.000~35 0.004362 0.000025 0.001104 0.007135 0.000434 0.009479 0.000006 0.000000 0.00800~ 0.000051 0.012791 0.000593 0.009631 0.001142 0.000102 0. 00176 O.000744 0.01493 0.000160 0.

008 077 0.00002893 '01 72 959 0• 79~ 00.017926 0.001005 0.030110 0.000205 0.000006 0.000001 0.000967 0.001469 0.000095 0.122078 0.40314? 0.032999 0.000012 0.001240 0.000927 0.000000 0.000279 0.070083 0.000005 0.001457 0.000107 0.002361 0.012091 0.001007 0.001017 0.000021 0.000389 0.000019 0.000391 0.001013 0.000011 0. 01539.000210 0.000012 0.025484 0.000012 0.000029 0.000727 0.031470 0.000087 0.000729 0.000074 0.004926 0.000210 0.012143 0.000028 0. 00006 0.032261 0.021864 0.00235A 0.000277 0.002076 0.000000 0.000035 0.006177 0.013044 19 18 19 20 21 0.010840 0~007703 0~00~697 0.012443 0.000000 0.001833 0. Table 15 (continued) INDUSTRY 3n 37 3~ 40 41 4? 43 44 45 4A 47 48 49 50 51 5? 53 54 55 56 31 32 33 34 35 36 37 38 39 40 0.000022 0.000120 0.020042 0.000001 0.034735 0.000077 0.002008 0.002724 0.000003 0.001538 0.000073 0.000080 0.000363 0.000000 0.000019 0.001280 0.000051 0.000082 0.001098 8:883413 0.000662 1 ? 3 4 S A 7 8 9 )0 11 l~ ~S 27 ~~ 30 31 3~ 34 3S 35 0.007630 8.610119 0.018045 0.0 1093 0.000034 0.000000 0.000000 0.000024 0.000000 0.000015 0.005294 0.001615 0.000755 .002701 0.000016 0.004373 00.005747 0.000033 0.000342 0.00929S 0.001634 0.000000 0.024355 0.OOO?61 0~000103 0.001884 0.000051 0.003867 0.000316 0.000165 0.000001 0.000004 8'804698 • 32743 0.00127? 0.001186 0.00006273523 • S 0.000067 0.000004 0.003161 0.000242 0.0018B5 0.003949 0.000073 0.009152 0.002361 0.000113 0.000038 0.002645 0.000817 0.000968 0.007419 0.000190 0.011548 0.000093 0.000000 0.000191 0.000051 0.000005 0.000006 0.00020~ 0.000003 0.000000 0.000026 0.000128 0.000208 0.000011 0.000360 0.000000 0.003909 0.000 40 0.004781 0.000026 0.001316 0.000019 .000293 0.000000 0.000033 0.000182 0.000077 0.004642 0.003979 0.000000 0.00034'1 0.002294 0.000125 0.000000 0.000607 0.000708 0.000004 0.000029 8:888869 0. 037 0.000033 0.000110 0.000027 0.037638 0.000065 0.000723 0.000004 0.080536 .027737 0.000764 0.001881 0.00361~ 0.000016 0.045261 0.001071 0.000127 0.0 0420 0.000123 0.001834 0.0000 5 0.000056 0.000003 0.000667 0.000098 0.047013 0.000849 0.000009 0.004049 0.080156 0.000011 0.003941 0.000010 8:88888g 0'800014 O.003135 0.000914 0.000431 0.000013 0.000002 0.000004 0.001515 0.000000 0'833982 8'888881 O.000016 0.000160 0.001409 0.003827 0.011099 0.010781 0.001302 0.000083 0.000407 0.000290 0.000533 0.001460 0.020897 0.000554 0. 00358 0.002200 0.000000 0.00221? 0.000000 0.000000 0.001070 0.033135 0.000293 0.001118 0.000097 0.004983 0.000001 0.006105 0.000296 0.000000 0.030300 0.000119 0.000067 8.000245 0.008493 0.003767 8:8888Yr 0.000611 0.000029 0.003208 0.000084 8:gg~~t~ 8:5I~~33 8:?~b~~s 8:g8Y~I~ 8:8~~~~~ 8:888882 8:888?g~ 8:8b~1A~ 8:88~~2~ 8:888b4~ 0.000000 0.000000 0.000764 00.000378 0.00755S 0.000252 0.000779 0.000386 0.015311 0.00 000 0.009690 8:883b~t 8:88b~g? 8:8~ZS~~ 8:8888?~ 8:8882a~ 8:88~~I1 8:8?4~~r 8:8888~t 8:8?~6~~ 8:88~~~~ 8:8829a~ 8:88~t~f 8:8888?2 8:8888?2 8:88~~rS 8:88~7~2 8:888?31 0.007101 0.001135 0.000204 0.000350 8:88r7~~ 8:888~g~ 8:88g~~7 0.000126 24 25 2n 0.000000 0.001911 0.000463 0.000001 0.004622 0.000419 0.005626 0.027463 0.000107 0.000357 0.000991 0.000068 0.000000 0.002875 0.000376 0.000222 0.000306 0.000124 0.002383 8:8?28lg 36 37 38 39 40 0.001846 0.000000 0.000008 0.000239 0.03978'1 0.001056 0.000793 0.001149 0.005381 0.002437 0.000005 0.000007 0.000511 8.000299 0.001250 0.000015 0.000017 0.000256 0.000000 0.042859 0.011460 0.010658 0.000376 0.00247J 0.000515 8:8~~r4~ 8:88?~a~ 8:881e6~ 8:g88~~~ 8:888~l6 8:88b~6S 8:88gI~1 8:R886~g 0'800414 O.000337 0.000673 0.000051 0.00004\ 0.001170 0.0 0005 0.000044 0'888 247 O.000006 0.001405 0.000225 0.000005 0.001395 0.000531 0.000400 0.005861 0.007141 0.002145 0.004806 8'800044 • 00056 0.000784 8:88Sgjb 0.000021 0.000333 0.000 31 0.000483 0.000016 0.000049 0.000000 0.000827 0.000008 0.000051 0.000721 0.000284 0.000286 0.000518 0.000002 0.000189 0.0045?1 0.000355 0.000802 0.000239 0.000000 0.00 005 0.00°865 .000026 .000000 0.000002 0.001184 0.000008 0.001324 0.002250 0.000005 0.0 0000 0.008612 0.000004 0.001428 0.005797 0.000000 0.0~5074 0.011735 0.000027 0.008807 0.000701 0.000488 0.000028 0.000008 0.000013 0.000024 0.009792 0.000236 0.000131 0.000023 0.000006 0.000511 0.000000 0.000083 0.000002 0.005646 0.000017 0.001082 0.000023 0.003499 0.0 0628 0.000501 0.000005 0.000006 0.00 2 3 84 0.001364 0.000346 0.080000 0.008 016 0.080007 0.018959 0.000Q36 0. 1 0.003220 0.001279 0.021079 0.00 0 761 .000011 0.070049 0.00061S 244A 8 •'88 204A 0.080818 0.060536 0.000501 0.000000 0.000257 0.001291 0.001927 0.000011 0.000005 0.003827 0.000000 0.003008 0.612039 0.000023 0.000189 0.o Table 15 (continued) INDUSTRY 31 32 33 34 0.014616 .166692 0.018042 0.000917 0.055338 0.000035 12 13 0.002141 8:8853~e 8:8Z~6gy 8:88btt~ 8:85E~A~ 8:8b.001140 0.000251 8.000000 0.000006 0.007~~2 0.026984 0.010651 0.000171 0.002832 0.~~~ 8:888~~~ 0.001085 0.

001964 0. 00652 0.004740 0.000011 0.001320 0.003695 0.008116 0.013581 0.00n029 0.000986 0.000000 0.011837 0.000164 46 0.004904 0.03243? 0.001086 0.004268 0.09260? 0.003968 0.000000 48 49 50 0.000123 0.017444 0.002171 0.021213 0.000090 0.008688 0.000057 0.000001 0.032104 0.002839 0.G13591 0. "R7 9 10 11 ij 42 41 0.001078 0.072787 0.000000 0.001387 0.000815 0.001581 0.000095 0.003709 0.001341 0.016227 0.008017 0.000000 0.000309 0.002053 0.005438 0..000714 0.005793 0.004 092 0.010658 0.004432 0.025352 0.014594 8:888b98 8:8~~f~2 0.001211 0.003163 8:88?7g~ 0.000662 0.002652 0.000000 0.001366 0.004Z50 0.008058 0.000190 0.000296 0.000832 0.005132 0.00 077 0.030160 0.000493 0.000054 0.000886 0.001362 0.000000 0.000028 0.002096 0.000000 0.011998 0.000000 0.001744 0.001717 0.001607 0.000090 0.000783 0.000082 0.009949 8:8y.082021 0.002812 0.0010?8 0.004225 0.000123 0.005137 0.001064 0.000091 0.006586 0.013568 0.000001 0. 47 48 49 50 51 5? 51 54 55 56 41 42 43 8:881~ig 8:88f~~§ 8:8o+~2~ 0.003131 0.006975 0.000019 0.000691 0.007 8 43 0.005054 0.005341 0.00?495 0.000969 0.027649 0.006424 0.000290 0.00n417 0.020328 0.000152 0.008131 0.880366 8.003289 0.001270 0.000000 0.000000 0.000209 0.000992 0.002148 0.00n086 0.00S208 0.000098 0.002314 0.00376~ 0.000099 0.000000 0. 1314 • 059 • 3549 • 27~64 8:88ylSj 0.004439 0.001343 0.~ i~ 19 20 21 2? ?3 ?. w Table 15 (continued) INDUSTRY ~9 38 39 4Q 41 4? 4.0053?9 0.007868 0.000000 0.002547 0.000875 8:881561 0.000174 0.010950 0.000406 0.01901? 0.011843 0.010491 0.017646 0.100523 47 8:8?3jZl 0.002282 0.000226 0.033196 0.000164 0.001665 0.000429 0.no0012 0.000164 0.005020 0.003581 0.019022 0.000000 0.~~~ 0.006206 0.011251 0.015500 0.000182 0.003867 0.008858 0.000286 0.n05084 0.021418 0.000131 .002438 0.009442 0.001170 0.00n778 0.000236 0.000000 0.003812 0.onnl7n 0.000288 0.004459 0.000915 0.001701 0.006289 44 0.022187 0.000000 0.043304 0.023295 0.000000 0.§g$ 0.006420 l~ 8:8fa9g~ 8:888~~2 8:88~~~~ 8:888888 8:888~§j 8:888888 8:88A~~5 8:88853f 8:88Y9gfi 8:8~I5~~ 8:86~~?~ 8:888~19 8:883~~~ 8:866S68 8:88~61~ 8:8yg~8~ 8:888888 8:8Y28~2 8:88~6~~ 8:86~~I~ 8:88282~ 8:88flt9 8:8853I~ 8:g88~~2 8:888%a6 8:881~61 8:888j~~ 8:8867~S 8:88~~28 8:88~69~ 8:~9~2~~ 8:88~1~Z 8:88~f2~ 8:R8g8b~ 8:888~a9 8:g81~~a 8:88g~~+ 8:888II~ 8:886~~~ 8:88+6~~ ~~ 8:8oa~.000010 0.010482 0.000866 0.000037 0.010350 0.018209 0.000004 0.000000 o.015179 0.000345 43 0.003525 0.000251 0.000371 0.000103 0.016553 0.012510 0.005555 0.038639 0.000000 45 0.000000 0.007~56 0.007155 0.002852 0..001178 0.001~04 0.001207 0.000546 0.005160 0.000000 0.005159 0.000424 0.000067 0.000580 0.000007 0.000000 0.000201 0.002624 0.054R93 0.000513 0.006934 0.000000 0.003079 0.000116 0.002840 0.00?911 0.018317 0.005235 0.88 5756 8.027657 0.003294 0.189578 0.001784 0.000103 0.n24486 45 46 8:88?~~A 8:88iIg~ 0.002352 0.013436 0.000002 0.003194 0.000000 0.007981 0.000157 0.016483 0.000155 0.000000 0.046465 0.000226 0.001074 0.002573 0.044596 0.129359 0.02285'5 0.00012R 0.022477 0.806~19 O.015868 8:8~e~~~ 8:888~~~ 8:8~~6~~ 8:80S6~6 8:88Sj~~ 8:8888l~ 8:88ggg~ 8:88iSb~ 8:88Iig~ 8:8~~6~g 0.001 262 0.005409 0.000126 0.012139 0.002559 0.015793 0.018753 0.002558 0.000151 0.028109 0.000035 n.001973 0.000051 0.000000 0.000051 0.00272'5 0.01740? 0.000002 0.000254 0.001055 0.000191 0.000827 0.000923 0.000728 0.000101 0.002095 0.000000 0.000024 0.004473 0.024676 0.000145 0.015462 0.06371'7 0.003528 0.002079 0.099123 0.031574 0.021069 0.000047 0.012005 0.011301 0.000282 0.001031 0.000767 0.01211.026051 0.000310 0.007534 0.011506 0.001110 0.001907 0.011342 0.000017 0.000078 0.000478 0.007806 0.003257 0.013668 0.nonnno 0.004819 0.002232 0.000018 47 0.014342 0.001280 0.ono009 0..001317 0.000003 0.88°0 145 8.000001 0.002285 0.22?517 0.003026 0.007367 0.000000 0.000093 0.001390 n.00014'" 0.002959 0.000071 0.002266 0.011536 0.001171 0.000002 0.00120'5 0.800090 o.010312 0.001868 0.001517 0.0011A2 0..000000 0.001597 0.001272 0.003012 0.000302 0.000000 48 49 50 8:8888~8 8:88~5gj 8:8j.Table 15 (continued) N INDUSTRY 1 (' 3 4 C.006707 0.053684 0.000000 0.005984 0.036783 0.n01270 0.000276 0.000566 0.001359 0.008452 0.004863 0.018259 0.033206 0.119730 0.000074 0.000088 0.000118 0.001208 0.005656 0.002497 0.028831 0.000353 0.000891 0.000143 0.018981 0.002268 0.002041 0.000344 44 8:888888 0.000003 0.000485 0.001325 0.011399 0.004994 0. 44 4S 4.003252 0.021823 0.000000 0.024554 0.024045 0.04015'" 0.002590 0.006217 0.029469 0.000021 0.003887 .008463 0.038808 0.000236 0.000569 0.000000 0.000268 0.000249 0.000119 0.000075 0. 0.005560 0.01894R 0.001646 0.000083 0. ?7 2A 1'9 30 31 3? 33 34 35 8:88tg3~ 8:88g88~ 8:8874t~ 0.011573 ·018428 8 .000876 0.000000 0.000181 0.001222 0.001933 0.

236840 0.130238 0.000000 0.062812 ~ e.000000 .001758 0.000000 0.00305? 0.000000 0.000000 0.023669 0.000008 0.000000 0.041790 0.033245 0.020476 0.014978 0.00 0.000000 0.000000 0.031584 0.027540 0.032839 0.000002 0.015345 0.084653 0.016815 0.025223 0.053821 0.021756 0. 16 17 l~ 20 21 n 23 24 2e.000000 0.129104 0.037537 0.000000 0.016337 0.000000 0.000000 0.000012 0.017752 0.000000 0.029513 0.j:>.030583 0.031637 0.024715 0.080000 .025932 0.017517 0.000000 0.000000 0.015563 0.010351 0.000000 0.000000 0.010800 0.Table 15 (continued) .011239 0.oonooo 0.000000 0.137107 0.007434 0.000000 0.006069 0.072675 0.000000 0'800000 O.021666 0.063639 0.020832 0.005514 0.01649~ o.037713 0.000000 0.018358 0.064178 0.01566? 0.032082 0.020788 0.051230 0.000000 0.009617 0.081269 49 50 51 5.061314 0.000000 0.011128 8.009002 0.005814 0.000000 0.052023 0.01350fl 0.000000 0.000000 0.142386 0.000000 0.021990 0.000007 0.> 53 54 55 5f> 0.130227 0.009986 0.Oi5287 0.000000 0.057601 0.027685 0.067003 0.050939 0.000000 0.000000 0.009018 0.000000 0.02171? 0.034409 0.015674 0.094384 0.0 9667 0.032959 0.000009 0.000000 0.000008 0.000000 0.000000 0.019905 0.007585 0.006055 0.033972 0.175867 0.007588 0.000000 0.019249 0.008767 0.038952 0.100135 0.013175 0.005484 0.022209 0.025795 0.029006 0.000000 0.034622 0.014813 0. 51 INDUSTRY 52 53 54 55 56 1 0.000000 0. 28480 0.00000 0.005696 0.014507 0.000000 0.000000 0.036092 0.000002 0.008888 0.0172f18 0.007496 0.000000 0.006849 0.006335 .010510 tA 8:8~~~~~ 8:888888 0.000000 0.079107 0.009066 0. 7 q 8 10 I1 Ii' 13 14 Ie.031690 0.000000 0.000000 0.009173 0.013013 0.00n003 0.000002 0.000000 0.023740 0'846013 O.010107 0.078099 0.000000 0.009906 0.000000 0.085684 0.034244 0.01798 0.000146 0.005881 0.000000 0.000000 0.000000 0.028071 0.000002 0.012233 0.000000 0.002614 0.141526 0.00i'689 0.010691 55 8:8~1Z0~ 8~88888~ 8:8~~bf~ 8:8qblo~ 0.01710fl 0.050267 0.029616 0.000003 0.006671 0.000000 0.000001 0.074381 0.048622 4 0.01541R 0.000000 0.081055 0.016089 0.000000 0.000000 0.054776 0.003058 0.006003 0.03443? 0.000000 0.097200 0.076862 0.000001 0.170016 0.000000 0.000000 0.018518 0.000000 0.139446 0.006950 0.026385 0.0 0000 0.171498 0.005513 0.008277 0.011594 0.062807 0.027137 0.011858 0.011757 0.014073 0.011262 0.000000 0.000000 0.064392 0.030254 0.009674 0.247185 0. 26 ?7 28 2q 30 31 3? 33 34 3<=.032218 0. 8:8~3~e~ 0.027094 0.000000 0.000001 0.022918 0.016526 0.018961 0.011267 0.000000 0.0 4567 0.000000 0.094833 0.086200 0.015573 0.000000 0.075203 0.000000 0.000000 0.014904 0.075487 0.125884 0.000000 0.000000 0.073397 8:8~~¢4~ 8:888888 8:8Y~~~~ 8:888880 8:86~g~~ 8:hf~8~~ fI 0.085270 0.02034? 0.000000 0.019400 0.017800 0.013729 0.051590 0. 00000 0.000000 0.000000 0.208152 0.000000 0.000000 0.037655 0.118323 0.000000 0.000000 0.045723 0.011269 0.011136 0.043147 0.033998 0.004992 0.018932 0.008569 0.01864? 0.053481 0.000000 0.019794 8:888888 0. Ul Table 15 (concluded) INDUSTRY 3" 37 38 39 40 41 4(> 43 44 45 51 52 53 54 56 4" 0.075264 0.000000 0.000000 0.004501 0.000000 0.008728 8.030731 0.092093 0.023876 0.010675 0.000000 0.000000 8:8i~~¢j 8:88888~ 8:88~~g~ 8:8~~~~? .014899 0.

needs. and other interested groups to bear on important issues underlying mineral resource policy. In 1973/74 he was Ch ief of the Econometrics Division of the National Energy Board. was born in 1943. and The Mining Association of Canada. The prime function of the Centre is to carry out a program of research and publication on mineral policy issues. four by the Mining Association of Canada. which is carried out at the Centre and by means of contracts. industry. Mineral resources considered by the Centre include the metallic. and furnishes reliable information to promote a more fruitful exchange between representatives of the various groups concerned with resource policy. to enhance their value to non-specialists. returning in 1974 to RMC. This body comprises all researchers associated with the Centre and other. or enquiries about any aspect of its work. small exploratory studies are funded through a system of grants-in-aid of research. and structural minerals. and at other Canadian universities. labour. Committees of specialistsprimarily from Queen's University. Mines and Resources. The Centre welcomes comments on its publications. he took the B. in economics from Queen's University. members drawn from such groups as governments. A member of the Canadian Armed Forces from 1964 to 1972.The Authors Robin W. and the executive director is Dr. the federal Department of Energy. Treddenick taught at RMC from 1967 to 1973. and three by the federal government. C.D. J. The Centre is governed by a board of directors which decides general policy and establishes priorities for research. experience. G. and consumers. Boadway. but also including representatives of government and industry . Following graduation in engineering from the Royal Mil itary College of Canada. After serving in the Royal Canadian Navy. Ontario/Tel: (613) 547-5957 116 117 . A multi-disciplinary research organization. in economics from Queen's University. Dr. Research reports are reviewed by recognized authorities in each field before publication. He is an Associate Professor in the Department of Economics. so far as the subject allows. The Centre for Resource Studies The Centre was established in 1973 through the sponsorship of Queen's University. The program provides research and educational 'opportunities in resource studies at Canadian universities. in order to maintain high standards of scholarship. and views of individuals from governments.A. Aside from the main research program.aid in the development of projects and the selection of research proposals. in various departments at Queen's University. together with discussion of policy issues and other matters. but to present research results in a clear and readable form. and B. the Centre hopes to assist and broaden informed discussion of the issues. Centre for Resource Studies/Queen's University/Kingston. where he is an Associate Professor in the Department of Political and Economic Science. and advise on the progress of the research. Through the continuing support of the sponsors. universities. but no restrictions are imposed on authors at any stage of the investigation. Hand. The Centre's publications attempt not only to provide reliable data. labour. He holds the degrees of B. but exclude petroleum and natural gas. John M. Reports employ non-technical language. industrial and non-metallic. industry. is provided by the Advisory Council. it attempts to bring the knowledge. a native of Saskatchewan. Miller.D. There are fourteen other members . In this way.A. Guidance on the research program.PHIL. The chairman is Dean R. he also served as Lecturer in Economics at RMC from 1969 to 1972 and has taught at Queen's University since 1972. appointed. research by qualified investigators is funded at the Centre. The executive director and staff are responsible for the work of the Centre within this framework. from the Royal Military College of Canada and PH. Treddenick was born in Manitoba in 1938. proposals for research projects. degrees from Oxford University and a PH.seven nominated by Queen's University.