Empirical Testing on Newfoundland Data of a Theory of Regional Disparities

Maurice J. Scarlett is a geography professor at the Memorial University
of Newfoundland.

This slim volume addresses the question: why is unemployment so high in Eastern Canada, and this includes the related questions: why are earned incomes relatively low; why has unemployment been high for as far back as data exist (1947), and why have none of the attempts to tackle the problem worked?

Swan and Kovacs first examine the problem and the approaches to it which have been adopted hitherto: specifically the export-base approach and the “natural rate of unemployment” approach, and they note the inability of each to explain all the facts. They then outline their own approach, which is a full equilibrium model with its most important element in its labour market conditions.

In chapter 3 the model is outlined, together with its policy implications. This is followed by the mathematics of the model, chapter 4, and in chapter 5, a testing of the model.

The results lend some support to their theory, but in terms of statistical significance some of the key elements are not confirmed as strongly as might be wished; and there is thus a question of whether the findings justify policy revision. Nevertheless, some conclusions bear careful review, notably the assertion that outmigration would not influence the rate of unemployment or the level of real earned incomes of those who remain.

This is a stimulating contribution to a discussion of perhaps the most serious regional disparity problem we have in Canada, and as such it deserves to be read with attention.