Catching up? : an exploration of convergence in income and human capital at the sub-provincial level in Canada

Much of the research into the study of convergence in income and human capital in Canada has been focused on the evidence of this phenomenon at the provincial level.As such, it appears that support for conditional convergence in Canada at the subprovincial level has not yet been found.The purpose of this thesis is to determine if support for convergence can be found for income and human capital in Canada at the sub-provincial level, with the effects of migration also taken into account.To address this objective, a simultaneous system of endogenous equations was constructed and estimated using three-stage least squares.The results show that incomes and human capital stocks were growing faster in areas that had lower initial incomes and human capital stocks, over the 1986 to 2001 time period.These results provide support the convergence hypothesis at the sub-provincial level in Canada.the state/provincial level of a particular nation (Barro and Sala-I-Martin, 1992; Coulombe and Lee, 1995).Most of the researchers have been using simultaneous models of income growth and population change (Bano and Sala-I-Martin, 1992; Deller et al., 2001) or human capital change (Goetz and Hu, 1996; Coulombe and Tremblay,2007; Coulombe,2003).The test of convergence is to check the sign of the parameter for starting income level in an income growth equation.If its sign is negative, convergence is supported.In Canada, the focus on this topic has been centered on the provincial level, with many results showing evidence of convergence.However, at the sub-provincial or community level, evidence of the convergent pattern2 of growth has not been confirmed.In the United States, convergence was found at the county level (Brewin,2004; Goetz and Hu, 1996).For Canada, however, Partridge et al (2007) suggest that the linear nature3 of Canada's population distribution along the U.S. border and lower density may result in behaviour that is dissimilar to the U.S. Bollman (1999) in his study on rural development and human capital briefly noted that Canadian communities with a higher proportion of low income earners appeared to have been "catching up" to in the 1980s.But, he did not specifically investigate this finding as the standard regression of starting income or subsequent growth rates was not shown.With this in mind, the purpose of this thesis will be to determine if convergence is occuning in Canada at the sub-provincial level in per capitaincomes, while accounting 2 The pattem that convergence demonsfi'ates is an inverse relationship befween starting levels of capital or income and subsequent capital or income growth rate.' Partridge et al. (2007), citing C-RERL and U.S. Census 2000 data, state that if a line was drawn from Victoria and Vancouver, BC and Edmonton, AB to Winnipeg, MB and another line beginning in Southern Ontario that stretches up to Ottawa, ON, on to Montreal, PQ and ending in Halifax, NS, about 8l% of the Canadian population were situated below this narrow east-west expanse in 2001 .

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