Unemployment ripple: The impact of mine closures in Canada, 1987 to 2020

Abstract

Between 1980 and 2000, total employment in the Canadian mining sector halved. While the literature on resource economy is thriving in Canada, little is known about how local labor markets experienced such a decline. This article presents a novel strategy to measure the effects of mine closures on local direct, indirect, and induced employment. This ripple effect is estimated using impulse response functions over a 10-year horizon after the closure. I focus on the period between 1987 and 2020 and identify mine closures by introducing a novel longitudinal database constructed from archival maps. Results show that a persistent negative effect on mining employment is associated with a delayed and substantial negative impact on employment in industries with backward and forward linkages with the mining industry. The article contributes with a finer understanding of the transmission mechanism across the local labor markets and clarifies the need for cross-industry policies after a closure.