As part of my work on Ontario’s fiscal history since Confederation, I have also been putting together long-term series on Ontario output and population. Such information is useful given Ontario’s historic role as Canada’s largest economy and key industrial powerhouse. Much of this data is now available at Finances of the Nation which has Ontario nominal GDP back to 1926 as well as population back to 1867 and CPI (for Canada back to 1867).
The larger issue is how to estimate GDP for Ontario prior to 1926. However, given that Canadian GDP is available back to 1867, using Ontario’s average share of Canadian GDP from 1926 to 1950, one can apply that estimate (0.445) to Canada’s GDP from 1867 to 1925 (also available at FON) and obtain an estimate. This is not that unreasonable an approach given that past studies have suggested that at the dawn of Confederation, Ontario’s per capita incomes were already nearly 60 percent above Nova Scotia and New Brunswick and 25 percent higher than Quebec.
In terms of Gross Value Added as estimated by Alan Green (Regional Inequality, Structural Change, and Economic Growth in Canada. 1890-1956, Econ. Dev & Cult. Change, 1969) in 1890 Ontario’s economy was 49 percent of the Canadian economy while by 1910 it was at 41 percent and by 1929 it was 39 percent which averages out to 43 percent. So, the Alan Green numbers are used to estimate Ontario’s GDP for the 1867 to 1925 period using 49 percent to 1890 and 43 percent to 1925. It is important to note that these are estimates and far from perfect, but they nevertheless tell a long-term story.
Ontario’s per capita GDP is plotted alongside the rest of Canada’s (ROC) real per capita GDP in Figure 1. In 1867, Ontario’s real per capita GDP in $2020 was $3,428 compared to $2,768 for the rest of Canada – a 24 percent difference. By 2022, Ontario’s real per capita GDP has grown to $66,600 and the ROC’s to $67,258 – practically the same. What happens in between is a period of per capita income divergence till approximately the eve of the Second World War and then a period of convergence – with a fair amount of fluctuation.
Figure 2 plots the ratio of Ontario’s real per capita GDP to
the ROC’s. There is a brief period
during the wheat boom Prairie settlement era from about the early 1890s to
about 1902 when Ontario per capita incomes fall relative to the rest of Canada,
but this coincides with both the recession of the early 1890s and the scaling down of the Green Adjustment factor from 0.49
to 0.43 and may be a statistical artifact.
The Ontario per capita income advantage generally rises during the leadup to World War I and continues to rise afterwards peaking in the 1930s. It then falls as the rest of the country
economically develops and grows and by the first decade of the 21st
century, Ontario real per capita GDP is pretty close to the average of the rest
of the country. On average, for the entire period 1867 to 2022, Ontario's real per capita GDP has been about 30 percent higher than the rest of Canada. The average since 2000 has only been 7 percent.
Ontario’s early economic advantage and dominance fueled by the economic protectionism of the national policies enabled it to grow its per capita income relative to the rest of the country. With the economic development and diversification of the post-World War II period and the growth of western resource-based economies, the per capita income difference has fallen. In many respects, this process of long-term convergence can be viewed as a long-term Canadian economic success story that has seen a muting of regional economic differences There are of course still regional economic differences in terms of per capita incomes across Canada’s provinces and Ontario is still Canada’s largest economy and one of its wealthiest provinces, but it is not the cash cow you might think it is when it comes to per capita incomes at the moment.