Quebec’s Quiet Revolution: Government Intervention Does Not Explain Economic Progress

Viewpoint showing that the Quebec government’s expansion in the early 1960s explains little to none of the province’s convergence with the rest of Canada

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This Viewpoint was prepared by Vincent Geloso, assistant professor of economics at George Mason University and Senior Economist at the MEI, and Chandler Reilly, assistant professor of economics at Metropolitan State University of Denver. The MEI’s Taxation Series aims to shine a light on the fiscal policies of governments and to study their effect on economic growth and the standard of living of citizens.

Proposals to reform the Quebec government’s role and its level of involvement in the economy often evoke historical imagery. The most frequently cited image is that of Quebec overcoming its relative poverty within Canada through increased government intervention in the economy following the Quiet Revolution of the early 1960s.(1)

In this study, we provide a summary of new research showing that the Quebec government’s expansion explains little to none of the province’s convergence with the rest of Canada.

The Conventional View

The year 1960 is heralded as a crucial year not only because it marks a point at which Quebec departed from historically minimal government intervention in the economy,(2) but also because the expansion of government was more rapid than that observed in the rest of Canada. This was due to its greater involvement in multiple markets (for instance, electricity, steel-making, capital provision to small firms, increased subsidies to key business groups) and a major increase in spending on social missions such as education and health.

This, it is argued, provides a causal explanation for why Quebec caught up with the richer parts of Canada. In 1960, per capita income in Quebec was from 29.4% to 34.5% below the corresponding figure for Ontario.(3) By 1975, the discrepancy had declined to between 22.6% and 24.8%.(4)

This conventional view has lacked serious empirical analysis, however, especially regarding whether or not a causal link truly exists. After all, Quebec’s catch-up could have been due to factors unrelated to the expansion of government. Indeed, in recent work, we use causal inference methods to show that Quebec’s post-1960 economic convergence cannot be attributed to increased government involvement.(5)

A More Accurate Picture

In order to test the conventional view, we collected socio-economic data on life expectancy, schooling, income per capita, income per worker, income adjusted for household size, wages, and government spending from 1945 to 1975. This allowed us to use a method known as “synthetic controls” to create a composite Quebec from a mixture of other provinces before 1960. The idea is that 1960 marks the beginning of a “treatment period” (mimicking a laboratory experiment) in which Quebec received a treatment in the form of greater government intervention than anywhere else in Canada.

The composite Quebec is meant to represent what Quebec would have been like without the said treatment. In the pre-treatment period (1945 to 1960), the composite and the actual Quebec should be identical. In the treatment period, the difference between the actual and the composite Quebec represents the causal effect of the treatment, telling us to what degree, if any, the Quiet Revolution influenced the province’s development.

We repeated the procedure for each of the socio-economic indicators in our dataset. Table 1 summarizes these results by reporting the cumulative effects after 15 years, which is to say, by 1975.

Our calculations shows that overall, the Quiet Revolution did little to improve living standards. Across our four measures of living standards, only real wages show any positive effects, and only temporarily, in the 1960s, with no effects by the 1970s. However, the absence of results on real GDP per worker or per capita suggests that these transitory effects on hourly wages were offset by fewer hours worked or less income from non-wage positions (such as business, self-employment, or investment income).

Life expectancy at birth does show a small gain of 0.11 years (less than 2%). Schooling gains of almost one year are also observed. However, this latter result is entirely due to the increase of the minimum age for leaving school in the early 1960s.(6) It is not a result of the increase in government intervention in the economy.

Weak Evidence at Best

Although the evidence that the Quiet Revolution improved living standards is weak at best, the size of the Quebec government did dramatically increase after 1960. By 1975, the government was spending nearly $3 billion more than it would have if not for the Quiet Revolution, and collected more taxes accordingly. This figure is equivalent to 4.7% of GDP at the time. Together, the empirical results paint a clear picture of a growing government that did little to improve the lives of Quebecers.

Our research is the first to employ cutting-edge empirical methods to test the longstanding view that the Quiet Revolution is responsible for the province’s catch-up with the rest of Canada. Quebec certainly did converge, but it turns out that increased government intervention was not a key factor.