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A General Equilibrium Analysis of the Evolution of the Canadian Service Productivity

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  • Pierre Mohnen
  • Thijs Ten Raa

Abstract

Can the slowdown in total factor productivity that we have experienced since the mid-seventies be ascribed to the increasing importance of services, or do we instead observe an improvement of productivity in the service sectors by way of learning-by-doing or specialization? We feel that such questions are best answered within a general equilibrium analysis of the whole economy, i.e. a structural view of the whole economy. We maximize the level of domestic consumption subject to commodity balances and endowment constraints. The Lagrange multipliers associated with the endowment constraints measure the marginal productivities of labor and capital. We declare these shadow prices to be the factor productivities. The main empirical contribution of this paper is a reexamination of the services paradox. In Canada, the sluggish productivity in services is limited to finance, insurance and real estate, and to business and personal services. Any attempt to resolve the services paradox may focus on these two sectors. Transportation, trade, and to a lesser extent communication, are progressive sectors.
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Suggested Citation

  • Pierre Mohnen & Thijs Ten Raa, 1997. "A General Equilibrium Analysis of the Evolution of the Canadian Service Productivity," CIRANO Working Papers 97s-37, CIRANO.
    • Handle: RePEc:cir:cirwor:97s-37
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    File URL: https://cirano.qc.ca/files/publications/97s-37.pdf
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    References listed on IDEAS

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    1. repec:sae:niesru:v:162:y::i:1:p:99-111 is not listed on IDEAS
    2. de Jong, G., 1996. "Canada's Post-War Manufacturing Performance: A Comparison with the United States," Papers 32, Groningen State, Institute of Economic Research-.
    3. Hulten, Charles R, 1979. "On the "Importance" of Productivity Change," American Economic Review, American Economic Association, vol. 69(1), pages 126-136, March.
    4. D. W. Jorgenson & Z. Griliches, 1967. "The Explanation of Productivity Change," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 34(3), pages 249-283.
    5. De Jong, Gjalt, 1996. "Canada's Post-war Manufacturing Performance: A Comparison with the United States," GGDC Research Memorandum 199632, Groningen Growth and Development Centre, University of Groningen.
    6. Thijs ten Raa & Pierre Mohnen, 2009. "Neoclassical Growth Accounting and Frontier Analysis: A Synthesis," World Scientific Book Chapters, in: Input–Output Economics: Theory And Applications Featuring Asian Economies, chapter 19, pages 347-370, World Scientific Publishing Co. Pte. Ltd..
    7. Martin L. Weitzman, 1976. "On the Welfare Significance of National Product in a Dynamic Economy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(1), pages 156-162.
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    Cited by:

    1. Thijs ten Raa & Pierre Mohnen, 2009. "Competition and Performance: The Different Roles of Capital and Labor," World Scientific Book Chapters, in: Input–Output Economics: Theory And Applications Featuring Asian Economies, chapter 20, pages 371-388, World Scientific Publishing Co. Pte. Ltd..
    2. 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.

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    More about this item

    Keywords

    Productivity; linear programming; Canada; Productivité; programmation linéaire; Canada;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada

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