An Economic Analysis of Canadian Prairie Provinces' Forest Dependent Communities

The prairie convinces of Canada contain regional economies where forestry is the major economic activity, despite province-wide dominance by other sectors. These regions contain communities which are dependent primarily on forest resources for their economic and social well-being. Resource dependent communities have particular problems which are lacking in more diverse economies. These potential problems include instability, risk of mass unemployment, limited job mobility and limited amenities. This study identifies forest dependent communities and investigates the welfare implications of that dependency. This report containes three major components. The first outlines a methodology for identifying forest dependent communities. The methodology was formulated through an intensive review of past studies identifying dependence, as well as a review of pertinent theoretical literature. The second stage employs the methodology in identifying forestry dependent communities in the Canadian prairie provinces of Alberta, Saskatchewan and Manitoba. This analysis shows that there are few communities in these provinces which are totally dependent ont he forest industry, but there are few communities to which the forest industry is a vital component of their economic base. The third stage of the analysis uses a three-sector general equilibrium model to estimate welfare impacts on a community from exogenous shocks such as changes in world prices of forest products and changes in timber supply. The results from this model give theoretical and empirical support to the hypothesis that welfare impacts on a community from these exogenous influences are directly related to the degree of its forest dependency.