Quebec and Ontario lag far behind their Western cousin Alberta and many U.S. states when it comes to economic freedom in North America, according to a new report.

While Alberta finished first of all Canadian provinces and U.S. states, Ontario finished fifth among the provinces and a dismal 49th when U.S. states were factored in.

Quebec finished eighth among the provinces — ahead of only Nova Scotia and P.E.I. — and a sluggish 58th overall in the analysis by the Fraser Institute titled Economic Freedom of North America 2011.

The report measures the economic freedom of 50 states and 10 provinces based on indicators such as size of government, taxation levels, and labour market freedom.

It found a direct connection between the states and provinces with the most economic freedom, and those where residents earned the most.

“The 12 Canadian and American jurisdictions with the highest levels of economic freedom had an average per-capita GDP of $54,435 in 2009, compared to the 12 lowest-ranked jurisdictions in North America, where average per-capita GDP in 2009 was $40,229,” the report stated.

Following are the top five finishers:

• 1. Alberta
• 2. Delaware
• 3. Texas
• 4. Nevada
• 5. Colorado

After Alberta, Saskatchewan was the second-highest Canadian finisher, but came in at only 32nd overall. Newfoundland and Labrador followed as the third-place overall Canadian finisher at 37th place.

B.C. came in 43rd overall, Ontario finished in 49th, and the bottom five spots on the entire list were dominated by the following Canadian provinces:

• 56. Manitoba
• 57. New Brunswick
• 58. Quebec
• 59. Nova Scotia
• 60. P.E.I.

Improvements in Canada

But the news wasn’t all bad for Canada. On average, the report found that levels of economic freedom increased in Canada between 2000 and 2009.

And in Newfoundland and Labrador and Saskatchewan, levels of economic freedom rose significantly in that same period.

Though less dramatic, B.C. and Alberta have also shown signs of improvement, which has allowed them to surpass several U.S. states in the rankings.

“It’s no coincidence that the provinces showing increased levels of economic freedom are also the provinces whose economies have been the most vibrant and shown the most growth in recent years,” said Fred McMahon, Fraser Institute vice-president of international research and the co-author of the report, in a statement.

“A common theme among provinces with high levels of economic freedom is a commitment to low taxes, small government, and flexible labour markets. These conditions foster job creation and greater opportunities for economic growth.”

Conversely, he said, provinces with low levels of economic freedom result in lower standards of living and reduced opportunities for families.

The report states that Quebec, Ontario, Manitoba, Nova Scotia and New Brunswick have all shown declines in economic freedom between 2000 and 2009.

Particularly troubling, McMahon said, is the fact Canada’s two most populous provinces, Ontario and Quebec, have fared so poorly.

“If governments in these two provinces want to boost prosperity and improve the standard of living for their residents, they should look to the successful policies of provinces where economic freedom has increased,” McMahon said.