The Impact of Interprovincial Migration on Aggregate Output and Labour Productivity in Canada , 1987 - 2006

Interprovincial migration has increased significantly in Canada since 2003. This article develops a methodology to estimate total output gains due to interprovincial migration from two sources: gains due to increased employment, and gains due to re-allocation of workers between provinces with different productivity levels. It estimates that in 2006 the net output gains arising from interprovincial migration were $883.1 million (1997 constant prices), or 0.074 per cent of GDP. Higher employment rates in provinces experiencing a net positive balance of interprovincial migrants were responsible for $398.0 million of the gains and higher output per worker in these provinces was responsible for $485.0 million. A RECORD NUMBER OF PERSONS, 370,791, equivalent to 1.14 per cent of all Canadians, moved between provinces in 2006. This is up 50 per cent from 2003. To explore the implications for output and labour productivity of this development, the article develops a methodology to estimate the effect of interprovincial migration on aggregate productivity and output. According to economic theory, workers will tend to migrate from low productivity regions to high productivity regions2 due to economic incentives, thereby creating an overall positive effect on output and on productivity through a re-allocation, or composition, effect. This should be particularly relevant in the case of Canada as there are large regional disparities in economic development between provinces, where for example, Alberta is booming and has above average productivity levels while Atlantic Canada is experiencing weaker growth and has below average productivity levels. As well, moving between provinces is relatively simple in Canada, which should ensure large flows of migration, moving mostly from east to west. The first part of this article provides an overview of interprovincial migration in Canada and the characteristics of interprovincial migrants. The second part outlines the methodology used to calculate the contribution of interprovincial migration to total Canadian output and labour productivity. The third part presents the results. 1 Andrew Sharpe is the Executive Director, Jean-Francois Arsenault an economist, and Daniel Ershov a coop student, at the Centre for the Study of Living Standards. This is an abridged version of CSLS Research Report 2007-02 (Sharpe, Arsenault and Ershov, 2007). The unabridged report, which contains a large number of tables, is posted at www.csls.ca/reports/csls2007-02. The authors would like to thank Sharon Qiao, Christopher Ross, Simon Lapointe and Celeste Bradley for contributions to the report and Benoit Robidoux and Frank Lee from Finance Canada for comments. Email: [email protected] 2 In this article the terms low and high productivity are defined in terms of levels, as opposed to growth rates.