The
Economic Freedom
Network

Provincial Economic Freedom in Canada 1981-1998

by Faisal Arman, Dexter Samida, and Michael Walker

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Economic Freedom Analysis of the Provinces

New Brunswick

New Brunswick was the ninth freest province in Canada from 1985 to 1993, and moved to eighth position from 1994 onward, until reaching seventh in our 1998 estimate. With only minor adjustments in its policies relative to the rest of the country, this province has about the same amount of economic freedom as at the start of this period.

Between 1981 and 1994 government consumption as a percentage of GDP was over 25 percent and transfers and subsidies as a percentage of GDP fluctuated between 5.5 percent and 6.5 percent of GDP. This does not compare favourably with Alberta, where government consumption was 17.6 percent and transfers and subsidies were 4.2 percent of the provincial economy in 1994. New Brunswick's government enterprises had a combined net worth, liabilities and debt guarantees amounting to 42.9 percent of provincial GDP in 1994. The only province devoting a higher percentage of the provincial economy to government business enterprises was Quebec, where government enterprises equalled 54 percent of provincial GDP. As well, in 1995 New Brunswick had one of the highest top marginal tax rates of all the provinces.

However, despite enacting policies contrary to economic freedom from 1981 through 1994, New Brunswick started changing course in 1994. Although the province did not exhibit any radical improvements after 1994, these improvements moved New Brunswick up a single place in the freedom rankings. There was a marginal drop in the transfers and subsidies component. New Brunswick also reduced its annual minimum-wage income as a ratio of GDP, increasing its rating in the component, Regulation of the Labour Market. This rise, however, was negated in 1996.

New Brunswick has a lot of room for improvement. Particular areas of attention should include Government Operations and Regulations and Interprovincial Trade; in both, New Brunswick ranks near the bottom. New Brunswick has shown its capacity to change and additional changes will bring further benefits. If New Brunswick could increase its level of economic freedom to that of Alberta's, per-capita GDP could increase by as much as $7,600 to $8,600.

New Brunswick:Ranking for Components of the Index of Provincial Economic Freedom

	1981	1985	1989	1993	1994	1995	1998 (est.)
I.Government Operations and Regulations	10	10	(tie) 8	(tie) 9	10	10	(tie) 9
II.Takings and Discriminatory Taxation	6	7	7	9	5	3	3
III.Interprovincial Trade	(tie) 5	7	7	(tie) 5	(tie) 5	(tie) 5	(tie) 7
IV.Regulation of the Labour Market	8	8	(tie) 7	(tie) 5	(tie) 5	(tie) 2	(tie) 2

Part 1: Economic Freedom Ratings for the Components and Various Area and Summary Indexes: 1981, 1985, 1989, 1993, 1994, 1995, 1998 estimate.

	IPEF	Ranking
1981	3.9	7
1985	3.5	9
1989	4.5	9
1993	3.4	9
1994	4.1	8
1995	4.5	8
1998	4.5	7
			IPEF (1998 est.):		4.5	Trend:	Erratic

Components of Economic Freedom
			1981	1985	1989	1993	1994	1995	1998 est.
I. Government Operations and Regulations			2.8	3.2	3.9	3.1	3.1	3.1	3.3
(a) Consumption Expenditures (% of GDP)			3.0	3.0	4.0	3.0	3.0	3.0	4.0
(b) Government Enterprises and Guarantees			0.0	2.0	4.0	4.0	4.0	4.0	4.0
(c) Price Controls			6.0	6.0	6.0	6.0	6.0	6.0	6.0
(d) Regulatory Effort			2.0	2.0	2.0	0.0	0.0	0.0	0.0

II. Takings and Discriminatory Taxation			4.9	3.7	5.1	3.2	4.5	5.2	5.2
(a) Transfers and Subsidies (% of GDP)			7.0	7.0	7.0	6.0	7.0	7.0	7.0
(b) Top Marginal Tax Rate and Threshold			2.0	1.0	5.0	5.0	4.0	4.0	4.0
(c) Direct Corporate Taxes (% of profits)			7.0	7.0	8.0	1.0	7.0	10.0	10.0
(d) Provincial Sales Tax			4.0	0.0	0.0	0.0	0.0	0.0	0.0

III. Interprovincial Trade			4.0	3.5	3.5	4.0	4.0	4.0	3.5
(a) Occupational Licensing			4.0	4.0	4.0	4.0	4.0	4.0	4.0
(b) Marketing Boards			4.0	3.0	3.0	4.0	4.0	4.0	3.0

IV. Regulation of the Labour Market			1.0	4.0	6.0	6.0	6.0	7.0	7.0
(a) Minimum Wage Legislation			1.0	4.0	6.0	6.0	6.0	7.0	7.0

Economic Freedom Rating			3.9	3.5	4.5	3.4	4.1	4.5	4.5
Ranking of Province			7	9	9	9	8	8	7

Components of Economic Freedom

I. Government Operations and Regulation
	1981	1985	1989	1993	1994	1995	1996	1997
(a) Consumption Expenditures (% of GDP)	26.9	28.1	25.3	28.0	26.8	26.7	26.2	—
(b) Government Enterprises & Guarantees	86.6	68.4	46.9	48.9	42.9	—	—	—
(c) Price Controls	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
(d) Regulatory Effort	0.348	—	0.366	—	—	0.445	0.441	—

II. Takings and Discriminatory Taxation
(a) Transfers and Subsidies (% of GDP)	6.1	6.2	5.5	6.5	6.0	5.8	—	—
(b) Top Marginal Tax Rate and	52.9	55.4	48.0	50.7	51.4	51.4	51.4	51.1
Threshold at Which It Applies	$53,377	$62,161	$70,330	$95,295	$93,034	$93,071	$93,071	$94,201
(c) Direct Corporate Taxes (% of profits)	27%	27%	26%	39%	26%	22%	22%	22%
(d) Provincial Sales Tax	8.0	11.0	11.0	11.0	11.0	11.0	11.0	8.0

III. Interprovincial Trade
(a) Occupational Licensing	43.0	—	—	—	—	—	—	40.0
(b) Marketing Boards	34.6	40.6	37.5	36.4	36.9	36.3	38.5	—

IV. Regulation of the Labour Market
(a) Minimum Wage Legislation	77.3	61.1	51.2	51.6	49.2	46.9	52.1	—

Click Here to View Key to Areas and Components of the Index and the Weights Assigned to Each

New Brunswick:Recent Economic Indicators
Population 1996 (in thousands):763 Average annual rate of change 1985–1996:0.36 percent
Real per-capita GDP 1996: $16,684 Average rate of economic growth 1985–1990:1.5 percent; 1991–1996:2.0 percent

	1981	1982	1983	1984	1985	1986	1987	1988	1989	1990	1991	1992	1993	1994	1995	1996
Annual change (%) in population		0	0	1	1	0	0	0	1	1	1	1	0	0	0	0
Annual change (%) in real GDP		1.3	9.8	2.8	1.8	3.7	5.7	1.0	1.6	-1.6	1.1	3.8	4.1	2.6	1.9	1.4
Annual change (%) in real GDP (average of other provinces)		-3.4	3.9	6.1	4.6	3.5	4.2	5.1	2.4	-0.1	-1.9	0.7	2.2	4.1	2.3	1.5
Annual change (%) in real per-capita GDP		1.1	8.6	2.1	1.4	3.5	5.3	0.7	0.9	-2.3	0.3	3.2	3.7	2.37	1.7	1.0
Annual change (%) in real per-capita GDP (average of other provinces)		-3.6	2.3	4.1	3.6	1.9	2.5	2.8	1.5	0.5	-1.8	-0.8	1.3	2.9	1.0
Ratio of business investment to GDP (%)	22	22	17	16	18	16	15	17	19	17	16	15	13	13	13	14
General government budget deficit (-) or surplus (+) (% of GDP)	1	-3	-2	0	0	+1	+1	+1	+1	+1	-1	0	0	0	+1
Unemployment rate (%)	11.6	14.1	14.9	15	15.2	14.4	13.2	12	12.5	12.1	12.8	12.8	12.6	12.5	11.5	11.7

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Last Modified: Wednesday, October 20, 1999.