Canadians Losing up to $12,500 each a year Because of Restrictions on Economic Freedom
Study finds statistical relationship between economic freedom and provincial prosperity
Contact:
Michael Walker, Executive Director
The Fraser Institute, (604) 714-4545 Email: michaelw@fraserinstitute.caRelease Date: 14 January 1999
VANCOUVER, BC>>> Market restrictions, and entrenched government policies and regulations are costing Canadians up to $12,500 a year in annual income says a new study, Provincial Economic Freedom in Canada 1981-1998, released today by The Fraser Institute.
"Economic freedom is vital to the well-being of all Canadians. Those provinces that liberate their economies receive dividends for their efforts in the form of higher rates of growth and higher levels of income per capita. When provincial governments restrict economic freedom, growth is dampened and income per capita declines relative to economically free jurisdictions," says Dr. Michael Walker.
The study establishes the first-ever benchmarks for measuring economic freedom in Canada’s provinces. This comprehensive analysis examines the effects of government operations, transfer and taxation policy, inter-provincial trade restrictions and labour market regulation from 1981 to the present.
Each province is ranked on eleven different components split among these four categories. These rankings are weighted and summed to provide an overall estimate of provincial economic freedom. Moving up a single point in the index of provincial economic freedom adds an additional $2,433 to provincial per capita GDP.
Alberta has consistently ranked as the most free province, except in 1985 and 1989 when it switched places with consistently second place Ontario. At the other end of the spectrum, Quebec and Newfoundland have consistently ranked as the least economically free provinces.
The greatest improvement in economic freedom was in Prince Edward Island, which has moved from the sixth freest province in 1981, to the third freest in 1998.
Not surprisingly, the largest drop in economic freedom was found in British Columbia. That province was ranked the third freest province from 1985 to 1993, but has recently dropped to the eighth freest province due to changes in provincial government policy.
The 1998 ranking of the provinces (from most economically free to least) is: Alberta, Ontario, Prince Edward Island, Saskatchewan, Manitoba, Nova Scotia, New Brunswick, British Columbia, Quebec and Newfoundland. The statistical model developed in the study suggests that by increasing the level of economic freedom to the same level currently found in Alberta, Ontario residents could each benefit by between $5,500 and $6,100 per year, British Columbia residents between $7,800 and $8,700 per year, and Quebec residents by an astounding $9,800 to $11,000 per year.
Among the most important results of this study is the finding of a strong statistical relationship between economic freedom and economic well-being. This implies that provinces with major market restrictions tend to generate a lower standard of living for their citizens. While the obvious cases in point are Newfoundland and Quebec, other provinces should not ignore the lessons of this study.
"Until we produced this study, people did not have the necessary facts to see the link between economic freedom and their income. Government rules and regulations dampen economic growth and destroy large amounts of potential income—income that we will never see," says co-author Dexter Samida.
Overall, the study paints a clear picture of the decisions facing provincial governments. "The evidence presented in this study is unambiguous. Regardless of external market conditions or natural endowment, if a provincial government wishes to increase the living standards of its citizens, allowing them increased economic freedom is essential," concludes Samida.
Established in 1974, The Fraser Institute is an independent public policy organization based in Vancouver.
For further information, or for a copy of Provincial Economic Freedom in Canada 1981-1998, contact:
Suzanne Walters, Director of Communications,
The Fraser Institute, (604) 714-4582,
Email suzannew@fraserinstitute.ca
info@fraserinstitute.ca
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