Abstract
Traditional regional convergence theory has come under serious scrutiny in view of the recent divergence in regional incomes in the U.S. during the eighties. Neither the neoclassical theory of a steady decline in regional disparities over time nor Kuznets’ inverted-U hypothesis can satisfactorily explain regional divergence in an advanced industrial nation. Alternative theories that emphasize spatial restructuring of economic activity have been offered to explain rising regional inequality in the U.S. In this paper, we caution against a hasty approach to new theorizing based on the U.S. experience alone. We study the Canadian experience with regional economic convergence to see how, if at all, it parallels the experience of the United States, Europe, and Australia, with respect to regional growth. By examining provincial data at the industry level, we seek to detect if there are any leading sectors of spatial concentration as in the U.S. We find that, unlike the U.S., European, and Australian experience, Canada has been characterized by consistent, albeit gradual, economic convergence, including in the 1980s. No leading sectors of regional importance emerge, but based on available data, federal programs of regional equalization may be at least partly responsible for continued regional convergence in Canada.
Highlights
The issue of what happens to income differentials over time m a given country has been of interest from both a theoretical and a public policy perspective
We present an overview of the measures of regional income disparity estimated in this study
Data on federal transfers to provincial and local governments were obtained for recent years-1986, and 1992. We focus on these years, since the observed Canadian regional convergence of the 1980s, especially the late 1980s, is in direct contrast to the regional economic divergence in the United States during the same period, and of greater interest
Summary
The issue of what happens to income differentials over time m a given country has been of interest from both a theoretical and a public policy perspective. Recent findings suggest that regional income disparities have increased in mature economies, like the United States (Amos 1989,1991; Braun 1991; Coughlin and Mandelbaum 1988), regions of Europe (Barro and Sala-i-Martin 1991), and Australia (Maxwell and Hite 1992) This evidence has provoked new hypotheses of regional development that emphasize spatial restructuring due to international competition (Fan and Cassetti 1994), regional concentration of new leading sectors (for example, communications) in the traditional growth centers (Amos 1991), and the importance of economies of scale and transportation costs. The upward divergence of the Northeast and California during the 1980s, for example, is attributed to a sectoral shift to high technology industries located in these states (Barff and Knight 1988; Coughlin and Mandelbaum 1988; Lampe 1988)
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