debt, GDP and migration
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The economic dimensions of the sovereignty debate in Québec: debt, GDP and migration Kim Somers and François Vaillancourt Université de Montréa/CIRANO Outline of presentation • • • • Background Debt issues GDP issues Migration Issues 2 Background-1 Demography • Francophone part of North America • Population of 8 million • Decreasing share of Canada’s population 29%=>24% 1960-2010 • 80% French speaking stable 1960-2010 • 60% Francophones do not know English • Net loser of interprovicial migration since 1960 3 Background-2: key dates • Québec was never independent: – French(Nouvelle-France)1608-1763 – British(Scottish) 1763-1867 – Province of Canada 1867- • Révolution tranquille 1960-1966: modernization • Independence parties 1960=>1968 PQ • Referendum 1980 and 1995 4 Background 3-the constitutional background(2) • What does Québec want? • Fulton Favreau 1964=>Union Nationale 1966 • Victoria Charter 1971+ Gens de l’air 1976=> PQ 1976 • Trudeau amendment patriation 19811982;Québec said no • Meech Lake 1987-1990 • Charlottetown 1992 national referendum 5 Background-sovereignty support,% vote 49 50 45 40 40 35 30 30 25 25 20 15 10 10 5 0 1960 1966 1970 1973 1980 1995 6 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Background sovereignty support polls 1961-2012 60 50 40 30 20 10 0 7 Debt issues -1 • Existence of risk premium • Sharing of debt • Context of large federal deficits 1974-1997 resulting in little mention in 1980 referendumand bonds that tie in 1995 • Context of indebted province dependent on federal transfers for 20% public revenues 8 Debt issues -Premium Johnson and McIlwraith 08-10/1995 Q/O Post referendum drop ≈ 0.40 Burnie 1975-1990 =0,55 Booth Georgopoulos and Hejazi 1981-2000 Q/ROC prov ≈0,25 Thibeault’s and Wynant 01/1976-10/1978 Maximum:0,6 in Canada and 1.0 in USA declining over time Schuknecht, von Hagen and Wolswijk 1991-2005 0 Average premium 5 studies ≈0.35-0.40 9 Debt issue-Sharing method % Population Pre or post migration GDP 25.4 (1990);23.6 (2011) ∆1% migration? Assets linked debt 16.6-19.3 (1991) Past benefits (fiscal balance) 32 Average 24,6 23.2 (1990) : 19.6(2011) 10 GDP-1: 1£=1.6$ • 320 billion $ in 2012 • Decreasing share of Canada’s GDP 1961-2011 => 26%=>19% • Increasing share of Int X relative to Can X • More diversified output than Alberta (oil) or Ontario(cars) • Ongoing impact • Secession impact 11 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 GDP per capita 1966-2010(1992$) 35000 30000 25000 Quebec 20000 Ontario 15000 10000 12 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1966 Differences O-Q GDPper capita(1992$) 7500 7000 6500 6000 5500 5000 4500 4000 3500 3000 13 Dependent variable: Q/O GDP ratio 1966-2010 Independent variable lnEmployment lnCapital Dummy_PQt Equation 1 Equation 2 Equation 3 Equation 4 (Robust OLS level) (OLS level) (PWE level) (PWE level) 0.298* 0.235* 0.169 0.152 0.395* 0.451* 0.492* 0.462* 0.011 -0.000 Index_PQt R2 -0.004 0.73 0.72 0.001 0.24 0.25 14 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Private non-residential Investment PC Q and O (1992$) 1600 1400 1200 1000 Quebec Ontario 800 600 400 15 Dependent variable: Q/O I ratio 19662010 Independent variable lnBenefitst-1 nGDPt-1 Equation 1 Equation 2 Equation 3 Equation 4 (OLS level) (Robust OLS level) (PWE level) (Robust PWE level) -0.031 -0.070 -0.314 -0.316* 3.700* 3.690* 3.082* 3.070* l Dummy_PQt -0.019 -0.001 Index_PQt R2 -0.002 0.49 0.49 0.000 0.25 0.25 16 GDP-Impacts • Results above similar to Lavoie Perron Vaillancourt • Impact of secession – Common currency Can $ Joint Central bank? – 1980 Common sense trade; 1995 NAFTA framework (Québec early supporter) • Dungan Vaillancourt (1991) 1.5-3.5% -∆ simulation • Income effect greater: equalisation, EI,… 17 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Net inter-provincial migration Québec,1961-2010 5000 0 -5000 -10000 -15000 -20000 -25000 -30000 -35000 -40000 -45000 18 Impact PQ on Q inter-provincial migration balance 1961-2010 Independent variable Employmentt Equation 1 Equation 2 Equation 5 Equation 6 (Robust OLS (Robust OLS (Robust (Robust PWE level) level) PWE level) level) 204,699* 265,164* 291,606* 220,970* Q/O Earningst -19,547 -32,839 -10,585 -9.561 Q/O Dummy_PQt -8,471* Index_PQt R2 -6,895* -342* 0.78 0.74 -453 0.56 Language variables not show 0.50 19 Loss in Human capital 3 periods ,Québec (Charest) Total loss % anglophones % CH loss in $ billions in migrants CH capital stock 1976- 32 64 3,8 8 47 0,7 19 43 1,6 1981 19861991 19962001 20 Migration post indepedence • Out migration post independence • Maximum estimated at 20% non francophones => 300 000- 350 000 • + 1% francophones=> 60 000 • Total 400 000 or 5% population • Minimum 200 000 21 Conclusion • Sovereignty threat =>-∆ in labour flows and higher cost for K public (and private) • Québec fiscal policy attracts K by subsidization financed by taxes on immobile labour (F) • Standard of living would drop by about 5% in long run as fiscal balance both FG=>QG and FG=>Q individual is positive (3-5% GDP) 22
