National and Regional Trends in Business Bankruptcies, 1980 to 2005

Abstract

This paper provides an overview of the long run trend in business bankruptcies in Canada (limited to the 10 provinces) examines the reaction of bankruptcies by region to the stresses associated with fluctuations in the economy and analyzes the relation between the incidence of bankruptcies and the economic health of the regions. Over the past 25 years, Canadian businesses have experienced a number of tumultuous periods. After two decades of high bankruptcy associated with two major recessions and the implementation of two free trade agreements in the 1980s and 1990s, bankruptcies have returned by 2005 to levels experienced in the early 1980s. At the same time, the differences between the bankruptcy rates of Ontario, Quebec and British Columbia fell as the intensity of bankruptcies in these three provinces converged. Throughout the period, bankruptcies in these three provinces moved in concert with unemployment rates in most provinces. The exceptions are Alberta and Nova Scotia, which experienced marked increases in bankruptcies in the early 1990s.