Canadian Politics from Canada's Centre

Friday, March 10, 2006

GDP and GDP per Capita Since NAFTA

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NAFTA's effect on Canada is a hotly debated issue. To establish the real impact of the North American Free Trade Agreement (what a mouthful!), I'm looking at economic indicators and sociological measures. Here's the first piece, considering the data on GDP. Bookmark us so you can return for the following posts analyzing the economic data, and eventually, my commentary and conclusions on NAFTA's impact on Canada.
That said, here's the data on GDP and GDP per capita, as I've been writing for my Integrative Seminar project (a course they give in CEGEP, which is Quebec's version of community college).
One last thing before I forget: I'm not sure what to make of the GDP growth, nor how to conclusively link it causally with NAFTA. If you could comment with your insight on why we've had this growth, and where it's going, as well as how I can link it (or disprove a link) to NAFTA, that'd be great.
The different formatting is because this was copy-pasted from Word.

Indicators

GDP is a measure of economic activity within the geographical limits of a country. It calculates a nation's total production of goods and services in a year. The value of GDP is therefore equal to the total number of goods and services produced in a year, multiplied by their price at market. GDP per capita takes the value of the GDP and divides it by the number of people in a country to calculate the average value of goods and services produced by each individual. The limitations on this economic indicator are therefore inherent in its very nature. First, GDP can grow as the simple result of prices rising, or inflation. Second, GDP doesn't account for black market goods and services (i.e. prostitution), nor does it value goods and services that have no associated price, such as homemaking, and housesitting. While we can account for inflation's effects on the GDP by multiplying the number of goods and services produced by their prices in previous years, there is no accounting for the black market or homemaking services.

With this understanding of the GDP in mind, the data may now be considered. In the twelve years since 1994 (inclusively), the first year of NAFTA's implementation, Canada's GDP has grown at an average rate of 3.42% annually.[1] Real GDP for the 13 years (the OECD's presented the average growth from 1981 to 1991; the data for 1984-1993 was unavailable) prior to 1994, from 1981 to 1993 inclusively, was 1.94%. As an interesting side-note, 1998 marked a peculiar year for the Canadian economy, one in which Real GDP outstripped Nominal GDP, the latter figure being GDP not adjusted for inflation. The implication is that Canada had a negative inflation rate for that period.

Canada's population in 1981 was 24.8 million.[2] It had reached 28.7 million by 1993. 15% growth over 13 years means our population grew, on average, 1.21% annually. Canada's population numbered 29 million in 1994, and 32.7 million in 2006, for an average growth rate of 1.1%. The importance of these demographic statistics derives from the measure of growth in GDP per capita. Annualized Real GDP growth of 2.2% divided by 1.21% annualized population growth between 1981 and 1993 means our GDP grew 1.80 times as fast as population. The same calculations for the NAFTA period give a growth rate in GDP per capita of 3.10.



[1] According to data from the OECD's Economic Outlook 78. http://www.oecd.org/document/61/0,2340,en_2825_32066506_2483901_1_1_1_1,00.html

[2] According to Statistics Canada. http://strategy.sauder.ubc.ca/antweiler/public/pyramid.pdf and statcan.ca


Related articles on economics and NAFTA:
Unemployment in Canada since NAFTA - The next in my series on NAFTA.

2 Comments:

At 11:32 PM, Canadian Politico Blogger Toronto Tory said:

Perhaps you could look at the % of GDP that comes from exports.

For example, if the export share started growing more quickly after NAFTA, while the other portions of GDP didn't, you may have a compelling case.

I'm curious as to how the results will come out.

 
At 11:44 PM, Canadian Politico Blogger lecentre said:

Good point, Toronto Tory. Definitely something to be checked out. My idea was to look at it historically, to see if, since '94 the GDP grew, but exports would clearly be affected. On the other hand, the dollar was worthless for much of the NAFTA period to date, so that may have distorted the data, if the dollar's drop to 60 cents coincided with NAFTA.
Imports ought also be checked out.
Lastly, if you liked this, you might check out my criticism of trade deficits and surpluses as being outdated.

 

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