Well, in response to a comment in my last post asking how much variation in per capita revenues there is across the provinces, I've provided a graph of real per capita revenues (1997 dollars) for each province for the period 1975 to 2008 with the data that was used to compile the average and median per capita graphs in my previous post.
There is a considerable amount of variation. Alberta certainly sticks out during the boom of the late 1970s and early 1980s and as we move into the early 21st century there is a spike in revenues again for Alberta but also for Newfoundland and Labrador. In 1975, average real per capita provincial government revenues are 4,235 dollars and range from a low of 3,416 for Nova Scotia and a high of 6,064 for Alberta. In 2008, average real per capita provincial government revenues are 7,382 dollars and range from a low of 5,919 dollars for Ontario and a high of 9,488 for Newfoundland and Labrador. The highest per capita revenues in 2008 are for Newfoundland and Labrador, Alberta and an almost third place tie between Quebec and Saskatchewan. Natural resource revenues are definitely a factor in the top performers but as the previous post mentioned -all the provinces have seen an increase in their revenues. Ontario has always been near the bottom in terms of per capita revenue performance but after the early 1990s is on a lower growth trajectory than many of the other provinces. Enjoy!
Worthwhile Canadian Initiative 
The results for Ontario really surprise me. They mean that either Ontario has lower expenditures per capita than the average, or that Ontario has been piling up debt faster than other provinces. Is that right?
Nick:
Ontario does have lower spending per capita than most of the other provinces but it still does not keep up with revenues. It has also been piling on debt rather quickly. From 1998-2008, net debt in Ontario grew the fastest of the ten provinces by about 48 percent. Next was Quebec at 45 percent. The others all had lower growth rates.
Interesting!
Now if you want to open Pandora’s Box, you could look at federal government revenue and spending by provinces even though Statscan warns you against doing it.
Also, I’d be interested to see sources provided on a regular basis. That way, we can investigage other questions requiring the same data set. Thanks!
Simon:
The revenue and expenditure numbers are Statistics Canada numbers – I have an appendix in a paper in the European Journal of Health Economics (January 2010)that provides the exact sources. The net debt figures I refer to are from the Federal Fiscal Reference tables.
Thanks very much for the data. Do these provincial revenue numbers include transfer payments?
Richard:
The numbers are total revenues so transfers are included.
The history for Ontario is actually straightforward in terms of the politics.
From the war until 1985 Ontario was run by Conservatives, they had a bias towards small government but were broadly in the Canadian mainstream. The Peterson governments shared the same attitudes and did not have a long period to make large changes incrementally. The drop in 1991-1992 was a major recession in Ontario, made worse by federal governments attacks on Ontario revenue. Then Mike Harris happened. McGuinty is not substantively better.
“The numbers are total revenues so transfers are included.”
I assume then that if you remove the transfers there would be some significant differences between provinces. That’s important because of the likelihood that those transfers will be reduced over the next decade (despite promises to the contrary). If you have the time, I’d like to see a version of the chart w/o inclusion of transfers.
Actually, the history for Ontario is even more straightforward in terms of reality.
Ontario has one of the lowest tax burdens in the country and little resource revenue, so its revenue are low. Until the relatively recent return to deficit, the province was able to deliver a high quality of service with lower revenues because it enjoyed an economy of scale in a population that was relatively densely located. If it were to raise its income tax to the level of that of Manitoba or New Brunswick, it would have no deficit at all.
Geoff: “Until the relatively recent return to deficit, the province was able to deliver a high quality of service with lower revenues because it enjoyed an economy of scale in a population that was relatively densely located.”
That economies of scale/population density hypothesis is interesting. Would you (or anyone) care to flesh it out? What would be the main examples? Roads? hospitals? Education? Any evidence?
@Geoff, Your first and last sentences are true, but I have problems with the idea that Ontario is delivering a high quality of service. What are you using to measure service quality?
@Jim Rootham – Visit a hospital or drive on a highway in Quebec, or try to access public transport or libraries in New Brunswick and you’ll see what I mean in terms of service quality. I’m not saying Ontario is the epitome of quality public services, but it does relatively okay, and with the lowest revenue collection in the country.
@Nick – Roads, hospitals and education were exactly what I had in mind, in addition to the basic “machinery of government” overhead. I’ll need to poke around to back up this intuition, but to my mind the benefits of building a few mega-hospitals or high-quality universities that are located proximate to huge population bases are self-evident. Where the example falls apart is in comparison to Quebec, which enjoys similar benefits of scale but has gone completely off the rails economically.
Geoff – but if your hypothesis of economies of scale is correct, will it not manifest in the e.g. lower expenditures per capita on education or higher ed or health care – and thus be empirically observable, if methodologically dubious due to other factors skewing the results?
And I do not understand the logic of the benefit of building “a few mega hospitals or high quality universities is self evident”.
If anything, in smaller communities or quasi rural or rural or remote communities, one experiences “policy repression” in that simpler, more basic services are offered while advanced, complex services e.g. Heart Institutes are not offered at all in rural Ontario or northern NB (producing much greater economies in the “hinterland” as complex, advanced services are not offered at all producing 100% economies).
Re universities and for that matter hospitals, we make the customers come to us – we do not go to them – regardless of densities. Universities are located in reasonably large cities and not in villages – right? And per Nick’s remarkable post several months ago on university class size, economies of scale in universities are difficult to achieve beyond first year (if i recall accurately).
Ian – I would guess that you’re right that the less densely populated areas on Ontario enjoy lower-quality services than the urban areas, but as the majority of the population of Ontario lives in the densely populated areas they would only be aware of (and voting in response to) the higher-quality experience. Also, the money saved in serving the densely populated areas may be reallocated to serving the lighter regions.
For universities, I wasn’t thinking so much of class size; it takes a certain size of university to be able to provide the expensive graduate-level programmes (medical schools, law schools, business schools, etc) that school reputations are built on. Fredericton’s ability to “draw” students in this respect is obviously much lower than Toronto’s.