Economic Insights
Income Growth per Capita in the Provinces since 1950
Archived Content
Information identified as archived is provided for reference, research or recordkeeping purposes. It is not subject to the Government of Canada Web Standards and has not been altered or updated since it was archived. Please "contact us" to request a format other than those available.
Economic Statistics Methods Division and Economic Analysis Division, Statistics Canada
This article in the Economic Insights series illustrates how real income progressed across the provinces from 1950 to 2016. The performance of the provinces is discussed using a new set of long-run estimates for real gross domestic income per capita. This new dataset allows, for the first time, trends in aggregate real income across the provinces to be examined for the last 66 years. Long-run data allow the amplitude of cycles across time to be demonstrated, and provide sufficient data to understand changes in trends in provincial economies that are sometimes subject to long commodity cycles. Provinces focused on hydrocarbon extraction had the most rapid per capita growth. Among the other provinces, those with below-average per capita incomes in 1950 had higher growth rates than provinces with higher per capita incomes. As a result, the incomes of the provincial economies tended to converge over time.
Introduction
Since 1950, two major changes have occurred across provincial incomes in Canada. First, incomes became more similar; second, provinces with economies rich in oil and gas became the highest income provinces (Table 1).Note These changes did not occur rapidly, but were instead the result of decades-long processes that took place across both business and commodity cycles. They reflect the investment that natural resources attracted over long periods of time, as well as income convergence among provinces not focused on hydrocarbon extraction.
To recognize the scale of the changes and the importance of provincial endowments, measures of aggregate income and its components are required for many decades. The effect of shorter-term changes, particularly from commodity price cycles that may last multiple years (Macdonald 2017), can disguise the underlying long-term tendencies of provincial economic growth, even when periods of 20 years or more are examined.
Long-run data
For provinces in Canada, aggregate income estimates over extended periods of time have not been easily available. This has hindered the understanding of long-run regional growth. Breaks in time series can occur because of major conceptual changes in underlying data sources or because estimation methodologies change. Considerable effort is required to construct long-run estimates from sometimes disjointed historical sources.
Recently, a new dataset designed to facilitate long-run examinations of regional economic performance was made available in Table 36-10-0229-01 (Statistics Canada n.d.).Note This new dataset builds on the work conducted in the Canadian System of Macroeconomic Accounts and by Brown and Macdonald (2015) to extend the time component of modern measures of provincial and territorial aggregate income back to 1950. The dataset contains per capita estimates for the following: gross domestic product (GDP), including income components and final expenditure components; deflated components; real gross domestic income (GDI);Note and important ratios, such as the saving rate and the unemployment rate. These data allow major questions about regional growth over extended periods of time to be examined.
Reordering provincial income rankings
In 2016, the oil- and gas-producing provinces had the highest levels of GDP per capita (Table 1), followed by Ontario and British Columbia. The Atlantic provinces had the lowest GDP per capita. This ranking was considerably different in 1950, before the creation of the modern oil and gas industry. Ontario and British Columbia had the highest GDP per capita, while Alberta, Saskatchewan and Newfoundland each had GDP per capita below that for Canada overall. From 1950 to 2016, Newfoundland and Labrador (formerly Newfoundland) climbed from the province with the lowest relative GDP per capita, at 44.1% of Canadian GDP per capita, to the province with the third highest relative GDP per capita, at 104.5%. Saskatchewan moved from the province with the sixth highest relative GDP per capita, at 70.5% in 1950, to the province with the second highest GDP per capita, at 116.7% in 2016. While Alberta did not move much in rank, its GDP per capita grew significantly from 1950 to 2016, rising from 98.9% relative GDP per capita in 1950 to 132.4% in 2016.
| Province | 1950 | 2016 | ||||||
|---|---|---|---|---|---|---|---|---|
| Ranking | Income relative to Canada | Ranking | Income relative to Canada | |||||
| GDP per capita | Real GDI per capita | Relative GDP per capitaTable 1 Note 1 | Relative real GDI per capitaTable 1 Note 2 | GDP per capita | Real GDI per capita | Relative GDP per capitaTable 1 Note 1 | Relative real GDI per capitaTable 1 Note 2 | |
| number | ratio | number | ratio | |||||
| Ontario | 1 | 1 | 130.7 | 123.0 | 4 | 3 | 101.3 | 101.2 |
| British Columbia | 2 | 2 | 124.1 | 116.5 | 5 | 5 | 98.8 | 100.6 |
| Alberta | 3 | 3 | 98.9 | 95.8 | 1 | 1 | 132.4 | 132.3 |
| Manitoba | 4 | 4 | 96.0 | 92.9 | 6 | 6 | 91.7 | 90.8 |
| Quebec | 5 | 5 | 93.1 | 86.1 | 7 | 7 | 84.5 | 85.6 |
| Saskatchewan | 6 | 6 | 70.5 | 65.0 | 2 | 2 | 116.7 | 112.1 |
| Nova Scotia | 7 | 7 | 63.8 | 61.5 | 9 | 9 | 78.4 | 79.2 |
| New Brunswick | 8 | 8 | 61.3 | 57.8 | 8 | 8 | 80.5 | 81.0 |
| Prince Edward Island | 9 | 9 | 44.8 | 42.0 | 10 | 10 | 75.3 | 75.4 |
| Newfoundland and Labrador | 10 | 10 | 44.1 | 40.2 | 3 | 4 | 104.5 | 100.7 |
|
||||||||
The same basic patterns are revealed in changes in provincial income rankings, where income rankings are based on the real GDI measure that accounts for provincial differences in price changes.Note That is, stronger price growth in oil- and gas-producing provinces was not responsible for changes in the relative ranking of provinces.
Levels of average incomes became more similar
Another notable finding in Table 1 is that the difference between the highest and lowest relative GDP per capita shrank from 86.6 percentage points in 1950 to 57.1 percentage points in 2016. This is not only because Newfoundland and Labrador’s GDP per capita grew markedly, but also because the Atlantic provinces experienced higher per capita growth from 1950 to 2016 (Chart 1).
When the provinces are ranked based on average per capita income growth rates, those with large oil and gas deposits as well as those with lower per capita incomes grew the fastest. Conversely, provinces with higher per capita incomes in 1950 tended to grow relatively slowly. This occurs when either current dollar GDP per capita or real GDI per capita is examined. Ontario and British Columbia had the lowest per capita growth rates from 1950 to 2016, while Manitoba and Quebec grew just below the Canadian average. The Maritime provinces had above-average per capita income growth, as did the oil- and gas-producing provinces of Alberta, Saskatchewan, and Newfoundland and Labrador.Note
Data table for Chart 1
| Real GDI per capita | Current dollar GDP per capita | |
|---|---|---|
| Ont. | 1.9 | 5.3 |
| B.C. | 1.9 | 5.4 |
| Man. | 2.1 | 5.7 |
| Que. | 2.2 | 5.6 |
| Canada | 2.2 | 5.7 |
| N.S. | 2.6 | 6.1 |
| Alta. | 2.7 | 6.2 |
| N.B. | 2.7 | 6.2 |
| Sask. | 3.0 | 6.5 |
| P.E.I. | 3.1 | 6.6 |
| N.L. | 3.6 | 7.1 |
| Source: Statistics Canada, authors' calculations based on Table 36-10-0229-01. | ||
Convergence patterns over time
Average income levels have become more similar, resulting from differences in the pattern of long-run growth rates over the entire period.Note Convergence patterns over time can be illustrated using the standard deviation (sigma) of the income levels per capita across provinces (Chart 2). If sigma is declining through time, this indicates that incomes are becoming more similar; if sigma is increasing, this indicates that incomes are becoming less similar. Sigma calculated for all provinces declined from 1950 to the early 1970s. At that point, it notably increased, reflecting the different effects of rising oil prices on the economies of Alberta and Saskatchewan compared with the remaining provinces. In 1986, this increase was largely undone as energy prices declined sharply. It did not revert to a declining trend in the following decades. Rather, it slowly rose until the early 2000s, when energy prices began to rapidly increase again. When Alberta, Saskatchewan, and Newfoundland and Labrador are excluded, the change in trajectory during the early 1970s does not emerge. Instead, sigma excluding these provinces declined from the 1950s to around 2010.
Data table for Chart 2
| Real GDI per capita | GDP per capita | |||
|---|---|---|---|---|
| All provinces | Excluding Alta., Sask. and N.L. | All provinces | Excluding Alta., Sask. and N.L. | |
| sigma | ||||
| 1950 | 0.3 | 0.3 | 0.3 | 0.3 |
| 1951 | 0.3 | 0.3 | 0.3 | 0.3 |
| 1952 | 0.3 | 0.3 | 0.3 | 0.3 |
| 1953 | 0.3 | 0.3 | 0.3 | 0.3 |
| 1954 | 0.3 | 0.3 | 0.3 | 0.3 |
| 1955 | 0.3 | 0.3 | 0.3 | 0.3 |
| 1956 | 0.3 | 0.3 | 0.3 | 0.3 |
| 1957 | 0.3 | 0.3 | 0.3 | 0.3 |
| 1958 | 0.3 | 0.3 | 0.3 | 0.3 |
| 1959 | 0.3 | 0.3 | 0.3 | 0.3 |
| 1960 | 0.3 | 0.3 | 0.3 | 0.3 |
| 1961 | 0.2 | 0.2 | 0.3 | 0.3 |
| 1962 | 0.3 | 0.3 | 0.3 | 0.3 |
| 1963 | 0.3 | 0.2 | 0.3 | 0.3 |
| 1964 | 0.2 | 0.2 | 0.2 | 0.3 |
| 1965 | 0.2 | 0.2 | 0.2 | 0.3 |
| 1966 | 0.2 | 0.2 | 0.2 | 0.2 |
| 1967 | 0.2 | 0.2 | 0.2 | 0.2 |
| 1968 | 0.2 | 0.2 | 0.2 | 0.2 |
| 1969 | 0.2 | 0.2 | 0.2 | 0.2 |
| 1970 | 0.2 | 0.2 | 0.2 | 0.2 |
| 1971 | 0.2 | 0.2 | 0.2 | 0.2 |
| 1972 | 0.2 | 0.2 | 0.2 | 0.2 |
| 1973 | 0.2 | 0.2 | 0.2 | 0.2 |
| 1974 | 0.3 | 0.2 | 0.3 | 0.2 |
| 1975 | 0.3 | 0.2 | 0.3 | 0.2 |
| 1976 | 0.3 | 0.2 | 0.3 | 0.2 |
| 1977 | 0.3 | 0.2 | 0.3 | 0.2 |
| 1978 | 0.3 | 0.2 | 0.3 | 0.2 |
| 1979 | 0.3 | 0.2 | 0.3 | 0.2 |
| 1980 | 0.3 | 0.2 | 0.3 | 0.2 |
| 1981 | 0.3 | 0.2 | 0.3 | 0.2 |
| 1982 | 0.3 | 0.2 | 0.3 | 0.2 |
| 1983 | 0.3 | 0.2 | 0.3 | 0.2 |
| 1984 | 0.3 | 0.2 | 0.3 | 0.2 |
| 1985 | 0.3 | 0.2 | 0.3 | 0.2 |
| 1986 | 0.2 | 0.2 | 0.2 | 0.2 |
| 1987 | 0.2 | 0.2 | 0.2 | 0.2 |
| 1988 | 0.2 | 0.2 | 0.2 | 0.2 |
| 1989 | 0.2 | 0.2 | 0.2 | 0.2 |
| 1990 | 0.2 | 0.1 | 0.2 | 0.2 |
| 1991 | 0.2 | 0.1 | 0.2 | 0.1 |
| 1992 | 0.2 | 0.1 | 0.2 | 0.1 |
| 1993 | 0.2 | 0.1 | 0.2 | 0.1 |
| 1994 | 0.2 | 0.1 | 0.2 | 0.1 |
| 1995 | 0.2 | 0.1 | 0.2 | 0.1 |
| 1996 | 0.2 | 0.1 | 0.2 | 0.1 |
| 1997 | 0.2 | 0.1 | 0.2 | 0.1 |
| 1998 | 0.2 | 0.1 | 0.2 | 0.1 |
| 1999 | 0.2 | 0.1 | 0.2 | 0.1 |
| 2000 | 0.2 | 0.1 | 0.2 | 0.1 |
| 2001 | 0.2 | 0.1 | 0.2 | 0.1 |
| 2002 | 0.2 | 0.1 | 0.2 | 0.1 |
| 2003 | 0.2 | 0.1 | 0.2 | 0.1 |
| 2004 | 0.2 | 0.1 | 0.2 | 0.1 |
| 2005 | 0.3 | 0.1 | 0.2 | 0.1 |
| 2006 | 0.3 | 0.1 | 0.2 | 0.1 |
| 2007 | 0.3 | 0.1 | 0.3 | 0.1 |
| 2008 | 0.3 | 0.1 | 0.3 | 0.1 |
| 2009 | 0.2 | 0.1 | 0.2 | 0.1 |
| 2010 | 0.2 | 0.1 | 0.2 | 0.1 |
| 2011 | 0.3 | 0.1 | 0.3 | 0.1 |
| 2012 | 0.3 | 0.1 | 0.3 | 0.1 |
| 2013 | 0.3 | 0.1 | 0.3 | 0.1 |
| 2014 | 0.3 | 0.1 | 0.3 | 0.1 |
| 2015 | 0.2 | 0.1 | 0.2 | 0.1 |
| 2016 | 0.2 | 0.1 | 0.2 | 0.1 |
| Source: Statistics Canada, authors' calculations based on Table 36-10-0229-01. | ||||
The same pattern present in GDP per capita and real GDI per capita also appears in real household disposable income per capita (Brown and Macdonald 2015). However, household income measures do not adjust by the same amount as the newly available GDP per capita and real GDI per capita measures. This happens for two main reasons. First, GDP per capita and real GDI per capita include the effects of rising prices on wages and profits rather than only the effects on wages. The implication is that profits are more sensitive than labour remuneration to price increases and decreases. Second, real GDI per capita adjustments reflect a rising ability to purchase investment goods rather than only consumption goods. Investment goods are more sensitive, overall, to the type of adjustments that occur when energy prices rise (Macdonald 2010). As a result, GDP per capita and real GDI per capita provide a more complete image than real household disposable income per capita of the effect that changing energy prices have on differences in regional income growth patterns.
Resource price cycles
The difference between the sigma measure across all provinces and across the group excluding major oil and gas producers reflects a permanent difference that is exacerbated by cycles. This effect has accumulated over time, as cyclical upswings produced innovation and increased infrastructure investment that is not removed during cyclical downswings.Note
For oil- and gas-producing provinces, cyclical activity also creates an important dynamic. Commodity cycles, more so than business cycles, produce periods of acceleration, deceleration and reversal of long-run tendencies, and the scale of the effects is not constant across cycles. Moreover, the degree to which long-term growth patterns can be influenced by cyclical changes can differ across commodity price cycles. Despite significant declines in oil prices returning the price of oil to pre-boom levels, the commodity cycle during the 2000s resulted in Alberta’s real GDI per capita increasing 11.2% from 2002 to 2016. Newfoundland and Labrador (35.7%) and Saskatchewan (35.8%) fared better than Alberta and experienced larger overall increases.
However, the latest commodity cycle had a smaller magnitude than the previous cycle in the 1970s. Chart 3 shows the compound growth rate of real GDI per capita in Alberta beginning in 1972 (i.e., the cyclical upswing associated with the two oil shocks) and in 2002 (i.e., the cyclical upswing associated with the 2000s commodity cycle).Note The two cyclical upswings lasted approximately the same length of time: 14 years, from 1972 to 1986; and 13 years, from 2002 to 2015. In addition, both upswings had recessions during the cycle, and both cycles concluded with a rapid drop in oil prices (1986 and 2014/2015). In percentage terms, the 1970s upswing was about 10% larger until the second oil shock in 1979, after which it was about 50% larger than the 2000s upswing. Similarly, real GDI per capita declined 17.5% in 1986, a larger decline than in 2014/2015, when GDI per capita declined 14.9%. However, while the most recent cycle saw real GDI per capita increase by a little over 11%, the 1970s cycle saw real GDI per capita increase over 60%.
Data table for Chart 3
| Years since cycle began | Alberta, oil shocks (1972 to 1986) | Alberta, 2000s boom (2000 to 2015) |
|---|---|---|
| index, GDI per capita (cycle start=100) | ||
| 0 | 100.0 | 100.0 |
| 1 | 116.0 | 110.0 |
| 2 | 142.4 | 118.4 |
| 3 | 144.6 | 129.9 |
| 4 | 147.1 | 131.5 |
| 5 | 150.7 | 129.9 |
| 6 | 159.6 | 139.0 |
| 7 | 174.7 | 112.0 |
| 8 | 187.6 | 120.5 |
| 9 | 196.4 | 129.0 |
| 10 | 185.5 | 128.8 |
| 11 | 182.6 | 134.6 |
| 12 | 191.5 | 140.0 |
| 13 | 198.5 | 119.2 |
| 14 | 163.8 | 111.2 |
| 15 | 164.6 | Note ...: not applicable |
|
... not applicable Note: GDI: gross domestic income Source: Statistics Canada, authors' calculations based on Table 36-10-0229-01. |
||
Analysis of regional growth in Canada
This article demonstrates some of the regional analysis made possible by the release of the long-run provincial and territorial data in Table 36-10-0229-01 (Statistics Canada n.d.). The newly available long-run data will also make it easier to examine the extent to which differential income growth translates into differential consumption growth, and the role of saving and investment in long-run income growth patterns by province.
In Canada, regional growth has not been equal across provinces since 1950. Provinces with below-average per capita incomes tended to grow more rapidly, as did provinces with significant oil and gas deposits. These differences manifested themselves in measures of aggregate income (real GDI per capita and real GDP per capita), but also in measures of household income (Brown and Macdonald 2015). The differences in provincial growth patterns led to a reordering across provinces in terms of highest per capita incomes. Ontario and British Columbia were displaced by Alberta, Saskatchewan, and Newfoundland and Labrador for highest per capita income. Among the remaining provinces, per capita incomes became more similar. The reordering and the long-run nature of the underlying tendencies that produce it are apparent in long-run income estimates across governments, commodity price cycles and business cycles, policy changes related to deficits and the interest rate, the introduction and dissolution of international agreements (e.g., Bretton Woods or the Auto Pact), and events specific to particular regions (e.g., the sequence of softwood lumber disputes or the collapse of fisheries on the Atlantic and Pacific coasts).
References
Afxentiou, P.C., and A. Serletis. 1998. “Convergence across Canadian provinces.” Canadian Journal of Regional Science 21 (1): 111–126.
Baldwin, J., and R. Macdonald. 2012. Natural Resources, the Terms of Trade, and Real Income Growth in Canada: 1870 to 2010. Economic Analysis Research Paper Series, no. 79. Statistics Canada Catalogue no. 11F0027M. Ottawa: Statistics Canada.
Breau, S., and R. Saillant. 2016. “Regional income disparities in Canada: Exploring the geographical dimensions of an old debate.” Regional Studies, Regional Science 3 (1).
Brown, M., and R. Macdonald. 2015. Provincial Convergence and Divergence in Canada, 1926 to 2011. Economic Analysis Research Paper Series, no. 96. Statistics Canada Catalogue no. 11F0027M. Ottawa: Statistics Canada.
Coulombe, S. 2000. “New evidence of convergence across Canadian provinces: The role of urbanization.” Regional Sciences 34 (8): 713–725.
Coulombe, S. 2003. “Human capital, urbanization and Canadian provincial growth.” Regional Studies 37 (3): 239–250.
Coulombe, S. 2006. “International migration, asymmetric shocks and interprovincial economic adjustments in Canada.” International Regional Science Review 29 (2): 199–223.
Coulombe, S. 2011. Lagging Behind: Productivity and the Good Fortune of Canadian Provinces. C.D. Howe Institute Commentary, no. 331. Toronto, Ontario: C.D. Howe Institute.
Coulombe, S., and K. Day. 1999. “Economic growth and regional income disparities in Canada and the northern United States.” Canadian Public Policy 25 (2): 155–178.
Coulombe, S., and F. Lee. 1995. “Convergence across Canadian Provinces, 1961 to 1991.” The Canadian Journal of Economics 28 (4a): 886–898.
Coulombe, S., and J.F. Tremblay. 1998. Human Capital and Regional Convergence in Canada. Paper presented at the CSLS Conference on the State of Living Standards and the Quality of Life in Canada, Ottawa, October 1998.
Darku, A. 2011. “The impact of trade liberalization and the fiscal equalization transfer policy on provincial income disparities in Canada: an application of GMM estimation.” Applied Economics 43 (13): 1679–1689.
DeJuan, J., and M. Tomljanovich. 2005. “Income convergence across Canadian provinces in the 20th century: Almost by not quite there.” The Annals of Regional Science 39: 567–592.
Gunderson, M. 1996. “Regional Productivity and Income Convergence in Canada Under Increasing Economic Integration.” Canadian Journal of Regional Science 19 (1): 1–23.
Helliwell, J. 1996. Convergence and Migration among Provinces. Canadian Journal of Economics 29 (1): S324–S330.
Kaufman, M., P. Swagel, and S. Dunaway. 2003. Regional Convergence and the Role of Federal Transfers in Canada. IMF Working Paper WP-03-97. Washington, D.C.: International Monetary Fund.
Kohli, U. 2006. “Real GDP, Real GDI, and Trading Gains: Canada, 1982-2005.” International Productivity Monitor 13: 46–56.
Lee, F. 1996. “Convergence in Canada?” The Canadian Journal of Economics 29 (Special issue, Part 1): S331–S336.
Macdonald, R. 2007. Real GDP and the Purchasing Power of Provincial Income. Economic Analysis Research Paper Series, no. 46. Statistics Canada Catalogue no. 11F0027M. Ottawa: Statistics Canada.
Macdonald, R. 2010. “Real gross domestic income, relative prices and economic performance across the OECD.” Review of Income and Wealth 56 (3): 498–518.
Macdonald, R. 2017. A Long-run Version of the Bank of Canada Commodity Price Index: 1870 to 2015. Analytical Studies Branch Research Paper Series, no. 399. Statistics Canada Catalogue no. 11F0019M. Ottawa: Statistics Canada.
Macdonald, R. 2018. Data Sources and Linking Methods for Long-run Provincial and Territorial Data: an Update for Gross Domestic Product, Urbanization, Unemployment and Depreciation. Analytical Studies: Methods and References research paper series no. 018. Statistics Canada Catalogue no 11-633-X. Ottawa: Statistics Canada.
Macdonald, R., and L. Rispoli. 2016. How Big Was the Effect of Falling Commodity Prices on Canadian Real Incomes Between Mid-2014 and Mid-2016? Economic Insights, no. 66. Statistics Canada Catalogue no. 11-626-X. Ottawa: Statistics Canada.
McInnis, M. 1968. “The Trend of Regional Income Differentials in Canada.” Canadian Journal of Economics 1 (2): 440–470.
Reinsdorf, M.B. 2009. Terms of Trade Effects: Theory and Measurement. BEA Working Papers, no. WP2009-01. Washington, D.C.: Bureau of Economic Analysis.
Statistics Canada. n.d. Table 36-10-0229-01 Long-run provincial and territorial data. (accessed March 11, 2019).
- Date modified: