Income convergence across Canadian provinces in the 20th century: Almost but not quite there

There exists uncertainty on both theoretical and empirical fronts regarding Solow's (1956) predictions of income convergence across similar economies. We utilize recently developed time series techniques to examine the convergence characteristics of Canadian provinces between 1926 and 1996. Using personal income data, we find support for both stochastic convergence and β-convergence for the majority of Canadian provinces, after allowing for a structural break in the data. Our results therefore suggest that true economic convergence is occurring for the most part, though significant differences in income still remain. Studying the convergence properties of earnings, we find that governmental redistribution programs are hastening the trend towards convergence for personal income. Finally, the Atlantic and Plains provinces are found to display stronger convergence properties within their regions than Canada as a whole.