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Productivity Trends and Employment across Industries in Canada

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  • Pierre Mohnen

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  • Thijs Ten Raa

Abstract

This paper addresses the paradox between an increasing share of employment and a lower productivity growth of Canadian services vis-à-vis the rest of the economy in the period spanning the three decades from 1961 to 1992. It attempts to reconcile this apparent contradiction with the so-called Baumol disease, which predicts a decline in the share of services given their relative price. In short, Canadian services suffer little from the Baumol disease when capital is taken into account. However, their share of domestic final demand does not keep pace with their employment and value added shares. Yet the service shares of domestic final demand do rise and this remains a puzzle to be explained. One explanation could be a shift of innovation towards services and, related to this, a shift of consumer preferences towards these new services. If R&D figures are anything to go by, they tend to bolster this explanation. Cette étude examine le paradoxe de la croissance relative de l'emploi et de la décroissance relative de la productivité dans les secteurs des services au Canada au cours de la période allant de 1961 à 1992. Ce phénomène est apparamment en contradiction avec le malaise de Baumol (Baumol disease), qui prédit au contraire une baisse de l'activité dans les services à cause de leur performance médiocre en matière de productivité, qui devrait se réfléter dans des prix relatifs plus élevés. En résumé, nous concluons que le malaise de Baumol dans les services au Canada est mineur une fois que l'on inclut le capital dans la mesure de la productivité. Par contre, la part des services dans la demande finale domestique ne suit pas l'évolution des parts de l'emploi et de la valeur ajoutée. Et pourtant, la part des services dans la demande finale domestique augmente et ceci reste une énigme. Une explication possible serait un déplacement de l'innovation vers les services et, relié à cela, un déplacement des préférences vers les services. Les données sur la distribution de la R-D, pour ce qu'elles valent, tendraient à soutenir cet argument.

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Bibliographic Info

Paper provided by CIRANO in its series CIRANO Working Papers with number 2000s-10.

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Date of creation: 01 Mar 2000
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Handle: RePEc:cir:cirwor:2000s-10

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Keywords: Productivity; services; Baumol disease; innovation; Productivité; services; malaise de Baumol; innovation;

References

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  1. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-46, December.
  2. Leamer, E. & Levingsohn, J., 1994. "International Trade Theory: The Evidence," Working Papers 368, Research Seminar in International Economics, University of Michigan.
  3. Raa, T. ten & Mohnen, P., 1998. "Sources of productivity growth: Technology, terms of trade and preference shifts," Discussion Paper 1998-105, Tilburg University, Center for Economic Research.
  4. Baumol, William J, 1972. "Macroeconomics of Unbalanced Growth: Reply," American Economic Review, American Economic Association, vol. 62(1), pages 150, March.
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Cited by:
  1. Bonatti, Luigi & Felice, Giulia, 2008. "Endogenous growth and changing sectoral composition in advanced economies," Structural Change and Economic Dynamics, Elsevier, vol. 19(2), pages 109-131, June.
  2. D'Agostino, Antonello & Serafini, Roberta & Ward, Melanie, 2006. "Sectoral explanations of employment in Europe: the role of services," Research Technical Papers 8/RT/06, Central Bank of Ireland.

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