Warning: Wonky GDP analysis ahead (interesting though)

One of the things that folks who think a lot about economic development in New Brunswick focus on is the significant economic leakage from a small province such as New Brunswick. Visualize a ‘closed’ economy where almost all the economic activity stays inside the box – all the products and services you buy are produced in your closed economy. All the investment dollars flow inside the box.

New Brunswick is like a box full of holes – huge, gaping holes – but if effective – comparative advantage means that for every leak out of one hole, you get something poured in another.

Take a look at the following table. It is based on the Stats Can 2007 I/O tables and shows how much of the national GDP that is created from one dollar of output in New Brunswick stays in New Brunswick. For example, 99 percent of the economic activity generated from elementary and secondary schools (as measured by GDP) stays in New Brunswick.  Most of the economic activity generated by universities, health care services, etc. stays in New Brunswick – which makes intuitive sense.  It is interesting that potash mining, oil and gas extraction have relatively high in-province GDP.

On the flip side, most manufacturing in New Brunswick is creating a lot of GDP elsewhere in the economy.  At the absolute bottom of the table are the refinery and the film industry.  For each dollar spent in the film industry in New Brunswick, only 36% of the total national GDP created stays in New Brunswick.

What’s interesting about this table is the comparatives.  Look at Ontario.  91% of the national GDP created from the film industry stays in that province compared to 36 in NB.  Look at Nova Scotia.  Something is really wonky with the NS numbers – there must have been something strange going on to generate such a low contribution to GDP – but the point I think is quite stark.  Ontario across the board generates more GDP per dollar of output than other provinces – although Quebec and BC are right there as well.

What does this tell us?  Nothing we really already didn’t know.  Supply chains for this region are tied to Ontario and Quebec.  Specialized legal services, financial services, etc. are mostly outside the region.     It seems to me this just shows we have to work harder to generate GDP here than in Ontario and Quebec (per dollar of output).

This does not say that sectors with a low in-province GDP ratio are not important sectors.  The refinery is a very important economic driver -so is manufacturing – the point is that these sectors are tied in nationally (and internationally) more than others.

Percentage of National GDP that stays in the province  per $1 of exogenous output shock in that province

NS NB QUE ONT BC
Government Elementary and Secondary Schools 93% 99% 96% 98% 99%
All Other Warehousing and Storage 92% 94% 98% 99% 94%
Agencies, Brokerages and Other Insurance Related Activities 91% 92% 95% 96% 94%
Offices of Physicians 93% 92% 99% 98% 96%
Universities 92% 91% 95% 96% 94%
Hospitals 91% 89% 97% 96% 94%
Retail Trade 89% 88% 93% 96% 92%
Copper, Nickel, Lead and Zinc Ore Mining 93% 88% 94% 98% 91%
Sound Recording Industries 70% 88% 85% 93% 84%
Legal, Accounting, Tax Preparation, Bookkeeping and Payroll Services 87% 87% 95% 97% 95%
Oil and Gas Extraction 93% 86% 90% 98% 95%
Potash Mining n/a 85% n/a n/a n/a
Software Publishers 89% 84% 93% 95% 93%
Postal Service and Couriers and Messengers 85% 74% 91% 94% 89%
Non-Ferrous Metal (except Aluminum) Smelting and Refining n/a 73% 44% 79% 88%
Wood Container and Pallet Manufacturing 71% 73% 84% 80% 88%
Non-residential Building Construction 76% 72% 87% 93% 85%
Textile and Fabric Finishing and Fabric Coating 63% 71% 89% 90% 84%
Wood Kitchen Cabinet and Counter Top Manufacturing 72% 71% 88% 88% 84%
Data Processing, Hosting, and Related Services 81% 70% 92% 97% 93%
Food Services and Drinking Places 74% 70% 86% 90% 80%
Residential Building Construction 66% 68% 82% 90% 83%
Wood Window and Door Manufacturing 67% 64% 84% 87% 87%
Motion Picture and Video Exhibition 66% 62% 84% 93% 80%
Veneer and Plywood Mills 72% 54% 76% 80% 88%
Animal Aquaculture 78% 47% 89% 89% 80%
Starch and Vegetable Fat and Oil Manufacturing n/a 45% 57% 80% 88%
Motion Picture and Video Production, Post-Production, etc. 9% 36% 80% 91% 79%
Petroleum Refineries and Other Petroleum and Coal Products Manufacturing 48% 30% 59% 37% 46%
This entry was posted in Uncategorized. Bookmark the permalink.