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The question of whether regional disparities in Canada could arise as a result of nonconstant returns to scale and non-identical production functions is examined. This is accomplished by estimating and comparing the decision rules for factor demands across Canadian regions. The decision rules are based on a flexible and dynamic production technology which allows for the presence of internal adjustment costs, do not impose constant returns to scale or require hours and workers to have the same output elasticities. The model is estimated for four separate Canadian regions (Ontario, Quebec, the Western and Eastern provinces) on annual data ranging from 1965 to 1985.