The
Economic Freedom
Network

Provincial Economic Freedom in Canada 1981-1998

by Faisal Arman, Dexter Samida, and Michael Walker

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I: Government Operations and Regulations

I(a): General Consumption Expenditures by Government as a Percentage of GDP

The rating system for this component was adapted from the system used in the three editions of Economic Freedom of the World (Gwartney, Lawson, and Block 1995; Gwartney and Lawson 1997; Gwartney and Lawson 1998). Provinces were given a score determined by the scale shown in table I(a)-2. The highest score was given to provinces with government consumption that did not exceed 15.6 percent of provincial GDP and the lowest score was awarded to provinces with government consumption greater than 31.8 percent of provincial GDP.

Data Source: System of National Accounts, Provincial Economic Accounts, Annual Estimates, disk version (1961-1996), Statistics Canada, Catalogue No. 13-213.

Table I(a)-1.Total Government Consumption as a Percentage of GDP

	BC	AB	SK	MB	ON	QC	NB	NS	PEI	NF
1981	17.3	15.6	18.9	21.5	17.0	24.3	26.9	27.1	32.2	25.3
1985	19.8	17.1	23.4	24.5	17.4	25.2	28.1	24.3	31.8	28.0
1989	18.1	20.7	27.3	25.7	16.3	22.7	25.3	25.3	30.3	27.9
1993	20.6	19.9	26.6	27.0	19.7	24.5	28.0	27.6	30.5	26.9
1994	20.2	17.6	25.2	26.4	19.1	24.2	26.8	25.1	28.9	26.2
1995	20.0	16.7	23.6	24.9	18.8	24.1	26.7	25.0	27.2	25.9
1996	20.6	15.8	20.6	24.2	17.8	23.4	26.2	24.3	24.8	25.9

Table I(a)-2.Rating Criteria

Rating	General Consumption as Percentage of GDP
10	%<15.7%
9	15.7% - 17.4%
8	17.5% - 19.2%
7	19.3% - 21.0%
6	21.1% - 22.8%
5	22.9% - 24.6%
4	24.7% - 26.4%
3	26.5% - 28.2%
2	28.3% - 30.0%
1	30.1% - 31.8%
0	%> 31.8%

Table I(a)-3.Index Ratings for Government Consumption as a Percentage of GDP

	1981	1985	1989	1993	1994	1995	1996
Alberta	10	9	7	7	8	9	9
British Columbia	9	7	8	7	7	7	7
Manitoba	6	5	4	3	4	4	5
New Brunswick	3	3	4	3	3	3	4
Newfoundland	4	3	3	3	4	4	4
Nova Scotia	3	5	4	3	4	4	5
Ontario	9	9	9	7	8	8	8
Prince Edward Island	0	1	1	1	2	3	4
Quebec	5	4	6	5	5	5	5
Saskatchewan	8	5	3	3	4	5	7

I(b): Size of Government-Operated Enterprises and
Debt Guarantees as a Percentage of GDP

To estimate the importance of decision-making about business by the government within a province we measure the value of total liabilities and the net worth of government-operated business enterprises, and the value of government debt guarantees as a percentage of provincial GDP. This illustrates the relative size of such enterprises within provincial economies and allows for comparisons from province to province.

Data Source: Public Sector Assets and Liabilities, Historical Overview, Financial Management System, Statistics Canada, Catalogue No. 68-508. In the case of Quebec, the dollar value of the Quebec Pension Plan has been deducted because, for the other provinces, this service is provided federally.

Table I(b)-1:Size of Government-Operated Business Enterprises and Debt Guarantees (% of GDP)

	BC	AB	SK	MB	ON	QC	NB	NS	PEI	NF
1981	31	25	36	52	23	62	87	36	5	61
1985	51	28	45	43	25	64	68	32	9	60
1989	34	39	57	41	23	56	47	34	8	50
1993	30	32	42	46	28	52	49	32	7	41
1994	28	29	39	42	29	54	43	30	9	40

Table 1(b)-2:Rating Criteria

Rating	Size of Government-Operated Business Enterprises and Debt Guarantees as a percentage of GDP
10	% < 10.1% of GDP
8	10.1% - 25% of GDP
6	25.1% - 40% of GDP
4	40.1% - 55% of GDP
2	55.1% - 70% of GDP
0	% < 70% of GDP

Table 1(b)-3:Index Rating for Size of Government
Business Enterprises and Debt Guarantees (% of GDP)

	1981	1985	1989	1993	1994
Alberta	8	6	6	6	6
British Columbia	6	4	6	6	6
Manitoba	4	4	4	4	4
New Brunswick	0	2	4	4	4
Newfoundland	2	2	4	4	4
Nova Scotia	6	6	6	6	6
Ontario	8	6	8	6	6
Prince Edward Island	10	10	10	10	10
Quebec	2	2	2	4	4
Saskatchewan	6	4	2	4	6

I(c): Price Controls

The score for each province was based on an overall assessment of the controls that the province had placed on different goods and services. The scale was taken from the system used in Economic Freedom of the World.

Data Source: Research by Faisal Arman into provincial government regulations.

Table I(c)-1:Presence of Price Controls

	BC	AB	SK	MB	ON	QC	NB	NS	PEI	NF
Power Generation	�	�	�	�	�	�	�	�	�	�
Marketing Boards	�	�	�	�	�	�	�	�	�	�
Telecommunications	�	�	�	�	�	�	�	�	�	�
Minimum Wages	�	�	�	�	�	�	�	�	�	�
Alcohol Pricing	�	no	�	�	�	�	�	�	�	�
Rent Control	�	�	�	�	�	�	�	�	�	�
Insurance	�	no	�	�	no	no	no	no	no	no

Table I(c)-2:Rating Criteria

Rating	Description of Price Controls
10	No price controls or marketing boards are present
8	Except in industries (e.g. generation of electric power) where economies of scale may reduce the effectiveness of competition, prices are generally determined by market forces
6	Price controls are often applied in energy markets; marketing boards often influence prices of agricultural products; controls are also present in a few other areas, but most prices are determined by market forces
4	Price controls are levied on energy, agricultural, and many staple products (e.g. food, clothing, and housing) that are widely purchased by households; most other prices are set by market forces.
2	Price controls apply to a significant number of products in both agricultural and manufacturing industries.
0	There is widespread use of price controls throughout the economy.

Table I(c)-3:Index Rating for Price Controls

	1981	1985	1989	1993	1994
Alberta	6	6	6	6	8
British Columbia	6	6	6	6	6
Manitoba	6	6	6	6	6
New Brunswick	6	6	6	6	6
Newfoundland	6	6	6	6	6
Nova Scotia	6	6	6	6	6
Ontario	6	6	6	6	6
Prince Edward Island	6	6	6	6	6
Quebec	6	6	6	6	6
Saskatchewan	6	6	6	6	6

I(d): Regulatory Effort

This component measures expenditure by provincial governments in regulating business as a percentage of business revenue. Business revenue has been by calculated by subtracting total government consumption from GDP. Technically, this is a measure of private income within the economy.

Data Source: Business revenue data was compiled from the Provincial Economic Accounts, Statistics Canada, Catalogue No. 13-213 (subtracting total government consumption from GDP). Government expenditure on regulation data was prepared on a public accounts basis by Dr. Paul Reed, Senior Social Scientist, Statistics Canada, 1996.

Table I(d)-1:Expenditures on Regulations as a Percentage of Business Revenue

	BC	AB	SK	MB	ON	QC	NB	NS	PEI	NF
19801981	0.203	0.179	0.199	0.251	0.203	0.313	0.348	0.303	0.417	0.356
19871988	0.184	0.186	0.337	0.243	0.193	0.294	0.366	0.267	0.403	0.279
19931994	0.263	0.231	0.419	0.349	0.286	0.358	0.445	0.332	0.421	0.357
19951996	0.297	0.200	0.425	0.293	0.245	0.378	0.441	0.359	0.378	0.476

Table I(d)-2:Rating Criteria

Rating	Regulations as Percentage of Business Revenue
10	% <0.180%
9	0.180% - 0.203%
8	0.204% - 0.227%
7	0.228% - 0.250%
6	0.251% - 0.275%
5	0.276% - 0.299%
4	0.300% - 0.323%
3	0.324% - 0.347%
2	0.348% - 0.371%
1	0.372% - 0.395%
0	% >.395%

Table I(d)-3:Index Value for Regulatory Effort

	19801981	19871988	19931994	19951996
Alberta	10	9	7	9
British Columbia	9	9	6	5
Manitoba	6	7	2	5
New Brunswick	2	2	0	0
Newfoundland	2	5	2	0
Nova Scotia	4	6	3	2
Ontario	9	9	5	7
Prince Edward Island	0	0	0	1
Quebec	4	5	2	1
Saskatchewan	9	3	0	0

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