Human Capital and Canadian Provincial Standards of Living - ARCHIVED
Articles and reports: 89-552-M2006014
This paper examines the role of human capital accumulation in explaining the relative levels of income per capita across Canadian provinces. We use principally two different types of human capital indicators based respectively on university attainment and literacy test scores. A synthetic time series of the average literacy level of labour market entrants for each period between 1951 and 2001 is constructed from the demographic profile of literacy test scores taken from the 2003 Adult Literacy and Lifeskills Survey. The percentage of the working-age population holding a university degree is available since 1951 from the census figures. Our main results are the following. First, both human capital indicators are strong predictors of the relative levels of per capita income (minus government transfers) across provinces, along with the relative rates of urbanization and specific shocks in Alberta and Quebec. Second, the skills acquired by one extra year of schooling result in an increase in per capita income of around 7.3 percent. Third, we find that our literacy indicator does not outperform the university attainment indicator. This contrasts sharply with our recent result found at the cross-country level (Coulombe, Tremblay, and Marchand ) and suggests substantial measurement error in cross-country schooling data. Fourth, by focusing on regional economies that have similar levels of social infrastructure and social development, our analysis provides potentially more reliable estimates of the contribution of human capital accumulation to relative living standards.
Main Product: International Adult Literacy Survey [Series]