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Just checking.

Real per capita Canadian GDP in 2012 was 25 times what it was in 1870 (1.023^142), and real per capita US GDP in 2012 was 19 times what it was in 1870 (1.021^142).

A surprising number of economists take the arithmetic mean of growth rates instead of the geometric mean. That's OK when you are only talking a couple of years, since the error is small. But for 142 years the error can be huge.

Sorry to express doubt, but I have yet to find an economist using the geometric mean in a blog.

Fair enough. If you calculate the geometric mean (or compound annual growth rate) between the starting and ending values of real per capita GDP in 1870 and 2012 you get a growth rate of 2.1 percent for Canada and 2.0 percent for the US.

Many thanks. :)

So that's a factor of 19 for Canada and 17 for the US. :)

Interesting, Livio.

One very simple explanation: Canada is a smaller country than the US, so the Law of Large Numbers does not kick in as strongly to smooth things out.

It's interesting that my knee-jerk explanation (that Canada has a more commodity-based economy) doesn't actually help e.g. the 1960s were a better decade for Canadian growth than the 1970s or 1980s when commodity prices were doing very well.

Is the Canadian economy less diversified?

Nick Rowe,

It would be interesting to see that tested by comparing the instability of the Canadian economy to other similarly-sized economies and also even smaller economies.

Is the Canadian economy less diversified?

Yes, just take a look at the Canadian securities market. It's a mixed bag of natural resource plays and financial firms, and the rest is negligible. Nortel was one of the few manufacturing stocks of any significance on the TSE.

The 1960's was the golden age of Canadian (read: Ontario, and to a lesser extent, Quebec) manufacturing. Cheap resources, cheap power and a young and growing labour force. The Baby Boom was in full swing and Canadian mothers had 4.0 children on average (3.8 in the US). Quebec mothers were a large part of this fact (the "Victory of the Cradle").

If there is more volitility, there should be more volatility drag. If there is then, given equal average growth rates, cagr will be lower in Canada than the US.

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