Study: Provincial convergence and divergence in Canada, 1926 to 2011
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Per capita household disposable incomes in Canada in the majority of provinces became more similar over much of the last nine decades, according to a new study, "Provincial Convergence and Divergence in Canada, 1926 to 2011." The study found that, except for several notable episodes, personal disposable income per capita in the provinces converged over the period.
However, convergence in Canada has not been a smooth process. Periods when incomes became more similar (convergent periods) were followed by periods when incomes became less similar (divergent periods). Income diverged across provinces several times during the study period, in particular at the onset of the Great Depression in the early 1930s, following the return to peacetime production after the Second World War, during the first and second oil price shocks in 1973 and 1979, and then again, from 1996 to 2011.
While the tendency was for household disposable income per capita to become more similar across most provinces, income per capita was highly variable for Alberta and Saskatchewan, as their economies experienced significant contractions and expansions. Alberta and Saskatchewan have growth paths for relative per capita income that moved in tandem over time, rising up or sliding down the national rankings of relative provincial per capita incomes. They reached lows during the 1930s (6th place for Alberta, 10th for Saskatchewan), but by the 2000s, both provinces were ranked at the top of the income distribution (first for Alberta, second for Saskatchewan). Their movements across the income distribution were largely responsible for the overall convergence/divergence patterns across provinces.
Newfoundland and Labrador was part of the larger, convergent group of provinces prior to 1997, but subsequently moved to fall into lock-step with Alberta and Saskatchewan. From 1997 to 2011, income per capita for all three provinces increased at about the same rate, with Alberta posting a 23% increase relative to the national average, while both Saskatchewan and Newfoundland and Labrador reported increases slightly above 21%.
Note to readers
Chart 1 displays the range of per capita provincial estimates relative to the Canadian average. The bottom line in the chart is the lowest provincial per capita income relative to the national average for each year; the top line is the highest; and the distance between them illustrates the range of data. The wider the range, the more dispersed is provincial per capita income. As convergence occurred, the difference between the lines narrowed. When divergence occurred, the distance increased.
The research paper "Provincial Convergence and Divergence in Canada, 1926 to 2011," part of the Economic Analysis Research Paper Series (Catalogue number11F0027M), is now available from the Browse by key resource module of our website under Publications.
The paper "Constructing Provincial Time Series: A Discussion of Data Sources and Methods," part of the Income and Expenditure Accounts Technical Series (Catalogue number13-604-M), is also released today. This paper describes the linking and estimation procedures used to generate an updated vintage of the provincial comparison dataset, examining convergence across Canadian provinces.
Also released today, is a new CANSIM table (384-5000), entitled "Data on long-run provincial and territorial economic performance."
Similar studies are available in the Update on Economic Analysis module of our website.
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