Alberta's 'economic diversification' policies need to be more clearly defined, researchers say

The Alberta government's policies aimed at diversifying the province's economy are vague and don't line up with evidence showing it's already quite diverse in key areas, according to a new research paper by two Alberta economists.

"I view it as letting a buzzword kind of drive the policy agenda," said University of Calgary economist Trevor Tombe, who co-authored the study withUniversity of Alberta economistRobertMansell.

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The problem, according to their research paper, is that the government's economic diversification plans include"no definition or specific goals."

"At the end of the day, responsible governments must define their objectives clearly, and recognize the costs of policies meant to achieve those objectives," their paper reads.

"We cannot hope to have a sensible debate on economic policy without full and complete information. If it matters, measure it."

What's needed, they say, is a careful look at where the Alberta economy lacks diversity and what policies could fix it.

"Currently, that's completely missing from the debate," Tombe said. "The focus is on employment and that's precisely the area where we are already diverse."

Alberta and Saskatchewan actually lead the country in terms ofdiversity in direct employment, the research paper notes.

Those two provincesscore lowest in that area on a measure known as the Herfindahl index,and alower score means a less concentrated (i.e. more diverse) field of employment.

Alberta has third-most concentrated economy

That measure looks only at direct employment but the paper notes that, even when accounting for jobs in sectors related to Alberta's dominant oil and gas industries fields like professional services, manufacturing, finance, transport, and construction the province is still in "the middle of the pack" when it comes to employment concentration.

Looking at the diversity of Alberta's GDP as a whole, however, offers a slightly different story.

By that measure, the paper says Albertahas the third-most concentrated economy in the country behindSaskatchewan and Newfoundland and Labrador.

"There's a clear pattern: resource-rich provinces have more concentration (less diversification) than do other provinces," the paper reads.

"That being said, the resource sectors in Alberta and Saskatchewan account for a declining share of real economic activity."

Alberta lacks diversity in its export markets, the economists note, although there is not necessarily an ideal level of diversity in that category for a province.

"Overall economic prosperity is served by concentrating in activities that we are relatively best at, not in evenly spreading our resources out over sectors and markets," the paper reads.

The economists conclude that diversifying particular sectors of Alberta's economy isn't a bad idea in many cases, it's a "laudable goal," they write but it's important to clarify what needs diversification and why.

"Diversification means different things in different situations, depending on how it's measured," the paper reads.

"Absent a clear goal, proposed policy solutions risk being counterproductive."