Archived — Working Paper Number 11: Long-Run Perspective on Canadian Regional Convergence

by Serge Coulombe, Department of Economics, University of Ottawa, and Frank C. Lee, Industry Canada, May 1996


Summary

There have been many empirical studies analyzing convergence across OECD countries and regions since the late 1980s. Until the 1990s, the general view on the persistence of large regional economic disparities in Canada was somewhat pessimistic. Many empirical studies on Canadian regional disparities have recently emerged and have somewhat altered the conventional wisdom regarding the persistence of regional disparities in Canada.

This paper looks at the evolution of regional disparities in income/output per capita in Canada over a long period in light of recent studies on convergence. The authors analyze regional convergence in Canada by estimating beta-convergence and testing stationarity of sigma-convergence over the 1926–1994 period.

The analysis shows, on average, a pattern of convergence across Canadian provinces since 1926, but the process by which poor regions catch up to rich ones is not a smooth, transitional dynamic one, hindered sporadically by white noise random shocks. There is no evidence of sigma-convergence for the nine provinces prior to the entry of Newfoundland into Confederation in 1949; furthermore, most of the sigma-convergence detected appears to have occurred during the 1950–1977 period.

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