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The Widening Canada-US Productivity Gap in Manufaturing


Author Info

  • Jeffrey I. Bernstein


  • Richard G. Harris


  • Andrew Sharpe



In this article, Jeffrey I. Bernstein of Carleton University, Richard G. Harris from Simon Fraser University, and Andrew Sharpe from the Centre for the Study of Living Standards provide a comprehensive analysis of the widening of the Canada-US manufacturing productivity gap. Since 1994, labour productivity growth in manufacturing in the United States has greatly exceeded that recorded in Canada. Output per hour in Canada fell 20 percentage points from 87 per cent of the US level in 1994 to 67 per cent in 2001. This development has been responsible for most of the widening of the aggregate Canada-US labour productivity gap. The authors find that the growth in the gap largely reflects the acceleration of productivity growth in US high-tech manufacturing sector. The Canadian high-sector is smaller than its US counterpart and experienced much weaker productivity growth. It is estimated that these two factors themselves account for 70 per cent of the widening of the gap over the 1994-2000 period. Faster growth in capital intensity of production in the United States also played a complementary role in the growth of the gap, a development in part fostered by the greater increase in the price of labour relative to that of investment goods in the United States than in Canada. This was due to slower labour compensation growth and, to a lesser extent, a smaller decline in the price of investment goods in Canada. The depreciation of the value of the Canadian dollar relative to the US dollar played some role in this latter development. The authors conclude that Canadian economic policies have not directly contributed in any significant manner to the widening of the gap.

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Bibliographic Info

Article provided by Centre for the Study of Living Standards in its journal International Productivity Monitor.

Volume (Year): 5 (2002)
Issue (Month): (Fall)
Pages: 3-22

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Handle: RePEc:sls:ipmsls:v:5:y:2002:1

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Keywords: Canada; United States; Manufacturing; Labor Productivity; Labour Productivity; Productivity; Employment; Capital Intensity; Technological Change; Innovation; High-Tech; Capacity; Cyclical; Investment; Relative Price; Relative Price of Labour; Relative Price of Investment;

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  1. Tang, Jianmin & Baldwin, John R. & Jarmin , Ron S., 2002. "The Trend to Smaller Producers in Manufacturing: A Canada/U.S. Comparison," Economic Analysis (EA) Research Paper Series 2002003e, Statistics Canada, Analytical Studies Branch.
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Cited by:
  1. Andrew Sharpe, 2003. "Why are Americans More Productive than Canadians?," International Productivity Monitor, Centre for the Study of Living Standards, vol. 6, pages 19-37, Spring.
  2. Jeremy Smith, 2004. "Aggregate Labour Productivity Growth in Canada and the United States: Definitions, Trends and Measurement Issues," CSLS Research Reports 2004-04, Centre for the Study of Living Standards.
  3. Someshwar Rao & Jianmin Tang & Weimin Wang, 2003. "Canada's Recent Productivity Record and Capital Accumulation," International Productivity Monitor, Centre for the Study of Living Standards, vol. 7, pages 24-38, Fall.
  4. Andrew Sharpe, 2007. "Lessons for Canada from International Productivity Experience," International Productivity Monitor, Centre for the Study of Living Standards, vol. 14, pages 20-37, Spring.
  5. Jeremy Smith, 2004. "Assessing Aggregate Labour Productivity Trends in Canada and the United States: Total Economy versus Business Sector Perspectives," International Productivity Monitor, Centre for the Study of Living Standards, vol. 8, pages 47-58, Spring.
  6. Brown, W. Mark & Gu, Wulong & Baldwin, John R., 2008. "Geographic Market Access and the Effects of Trade on Length of Production Run, Product Diversity and Plant Scale of Canadian Manufacturing Plants, 1974 to 1999," Economic Analysis (EA) Research Paper Series 2008052e, Statistics Canada, Analytical Studies Branch.
  7. Gu, Wulong & Baldwin, John R., 2005. "Global Links: Multinationals, Foreign Ownership and Productivity Growth in Canadian Manufacturing," The Canadian Economy in Transition 2005009e, Statistics Canada, Economic Analysis.
  8. Someshwar Rao & Andrew Sharpe & Jianmin Tang, 2004. "Productivity Growth in Service Industries: A Canadian Success Story," CSLS Research Reports 2004-01, Centre for the Study of Living Standards.
  9. Centre for the Study of Living Standards, 2003. "Productivity Trends in Natural Resources Industries in Canada," CSLS Research Reports 2003-01, Centre for the Study of Living Standards.


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