June 2000 Fraser Forum: June Questions and Answers & June Graph

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Joel Emes

Q: How has Canada's income per person changed over the last few decades? How does this compare to other industrialized countries?

A: Canada's Gross Domestic Product (GDP) has increased from $11,720 in 1960 to $20,208 in 1997 (all figures are in 1995 US dollars). This $8,488 improvement works out to a 72 percent increase over the 37 years from 1960 to 1997. This is the third lowest growth of the 25 Organization for Economic Cooperation and Development (OECD) countries that have complete data. The average growth in this measure for the 24 other countries was 208 percent, almost three times Canada's 72 percent. Table 1 shows Gross Domestic Product per capita in constant 1995 US dollars for Canada and 9 other OECD countries from 1960 through 1997.

Table 1: GDP at Market Prices Per Capita, (1995 US$)
	1960	1965	1970	1975	1980	1985	1990	1995	1997	1960-1997 Percentage Growth
Canada	11,720	10,842	12,479	14,535	16,423	17,850	19,160	19,363	20,208	72
France	10,595	13,136	16,387	18,730	21,374	22,510	25,624	26,402	27,212	157
Ireland	5,013	5,929	7,258	8,566	9,999	10,895	13,845	17,917	21,063	320
Italy	6,628	8,226	10,771	11,969	14,621	15,708	18,141	19,019	19,325	192
Japan	8,213	12,226	20,015	23,296	27,672	31,589	38,713	40,955	42,701	420
Korea, Rep.	1,177	1,374	2,016	2,696	3,508	4,835	7,422	10,142	11,209	853
Mexico	1,688	2,048	2,368	2,782	3,432	3,241	3,187	3,139	3,412	102
Sweden	12,960	16,133	18,970	21,157	22,283	24,168	26,397	26,192	26,786	107
United Kingdom	9,499	10,678	11,831	13,015	14,205	15,546	18,032	18,890	19,867	109
United States	14,115	16,395	18,125	19,414	21,584	23,260	25,429	26,768	29,094	106
Sources: World Bank, 1999 World Development Indicators on CD-ROM; calculations by the author.

Q: Does the result for Canada's growth vis-�-vis that of the United States evident in table 1 hold if Purchasing Power Parity (PPP) rates are used instead of the exchange rate?

A: Yes. Table 2 shows that from 1975 (the first year full data is available) to 1997, the ratio of Canadian to US GDP per capita has fallen. Based on purchasing power parity exchange rates, Canada has dropped from a GDP per capita of 82.3 percent of that in the US in 1975 to one of 77.5 percent in 1997. For more information on purchasing power parity exchange rates, see the "Questions and Answers" in the May 1999 Fraser Forum.

Table 2: Canadian GDP per Capita as a Percentage of US GDP per Capita
	Conversion based on Purchasing Power Parity
1960	n/a
1965	n/a
1970	n/a
1975	82.3
1980	83.6
1985	84.3
1990	82.8
1995	79.5
1997	77.5
1975-1997 Percentage Change	(5.8)
Sources: World Bank, 1999 World Development Indicators on CD-ROM; calculations by the author.

Q: Has Canada's GDP per capita been increasing steadily? How does Canada's growth (or decline) compare to that in other developed countries?

A: Analyzing five year intervals from 1960 through 1995 yields some interesting results. Canada is one of the 10 OECD countries to have a drop in real GDP per capita for any of the five-year intervals investigated. The other countries are: The Czech Republic, Finland, Hungary, Iceland, Mexico, New Zealand, Poland, Sweden, and Switzerland. Canada's drop occurred between 1960 and 1965, while those in the other countries happened in at least one of the intervals between 1975 and 1995.1 The June Graph shows how real GDP per person for Canada and several other OECD countries has changed relative to Canada's GDP per person in 1960. Of particular interest is Ireland. The ratio of Irish GDP per capita to Canada's 1960 GDP per capita has risen from .43 in 1960 to 1.80 in 1997 compared to Canada's rise from 1 in 1960 to 1.72 in 1997. In other words, Irish GDP per capita was well below Canada's in 1960, but higher than Canada's in 1997 partially because of strong growth in the 1990s.

Notes

Data for The Czech Republic, Germany, Poland, and Turkey is incomplete.

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