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
|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%|
|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%|
|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%|
|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%|