Executive summary

The importance of the unincorporated sector to employment has been well documented. For instance, self-employment in the unincorporated sector accounted for over 40% of all job growth in Canada between 1990 and 1998. Other measures of economic activity, however, have been lacking. This study provides a measure of the contribution of unincorporated enterprises to the Canadian economy in terms of gross domestic product (GDP) for the period 1997 to 2002.

The study separates the aggregate business sector GDP, including its components, into the unincorporated and incorporated sectors for 25 S-level industries and W-level detail for some of the more important industries of the unincorporated sector. In deriving the estimates, the study used the same data sources as those used to produce Statistics Canada’s Input-Output Accounts. Furthermore, it discusses some of the key legal and organizational differences between the unincorporated and incorporated sectors including tax regime, limited liability, number of entities, employment and capital intensity.

The analysis finds the GDP generated by the unincorporated enterprises was $82.2 billion in 2002, growing substantially less (an average of 3.1% from 1997 to 2002) than the incorporated sector (an average of 5.9%). The weaker growth of the unincorporated sector was reflected in both goods-producing (primarily agriculture) and service-based industries. One possible explanation may be that many self-employed owners of unincorporated enterprises reentered the work force to work for corporations. Employment in corporations rose close to 1.4 million workers between 1997 and 2002 while employment in unincorporated enterprises fell marginally.

The study represents the first attempt to estimate GDP for the unincorporated sector. Future work may permit us to measure productivity of the sector and to further divide the business sector’s GDP by size of firm for small, medium and large enterprises.