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What Explains the Canada-US ICT Investment Intensity Gap?

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  • Centre for the Study of Living Standards

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    Abstract

    It is widely recognized that machinery and equipment investment intensity is less in Canada than in the United States. What is less well know is that it is information and communications technology (ICT) investment that largely accounts for this gap. The author documents trends in ICT investment in both Canada and the United States and attempts to explain why ICT investment per worker in the Canadian business sector in 2004 was only 45 per cent of that in the US business sector. While no definitive explanation emerges, among the factors he identifies as playing a role are industrial structure, firm size distribution of employment, the price of labour compared to ICT investment goods, and the underestimation of ICT investment in official statistics.

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    File URL: http://www.csls.ca/reports/csls2005-06.pdf
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    Bibliographic Info

    Paper provided by Centre for the Study of Living Standards in its series CSLS Research Reports with number 2005-06.

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    Date of creation: Jun 2005
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    Handle: RePEc:sls:resrep:0506

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    Keywords: Machinery and equipment investment; information and communications technology; ICT; Investment gap; Business sector; Industrial structure; Firm size;

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    1. Silvia Fabiani & Fabiano Schivardi & Sandro Trento, 2005. "ICT adoption in Italian manufacturing: firm-level evidence," Industrial and Corporate Change, Oxford University Press, vol. 14(2), pages 225-249, April.
    2. Sabourin, David & Baldwin, John R. & Diverty, Brent, 1995. "Technology Use and Industrial Transformation: Empirical Perspectives," Analytical Studies Branch Research Paper Series 1995075e, Statistics Canada, Analytical Studies Branch.
    3. Bruce T. Grimm & Brent R. Moulton & David B. Wasshausen, 2005. "Information-Processing Equipment and Software in the National Accounts," NBER Chapters, in: Measuring Capital in the New Economy, pages 363-402 National Bureau of Economic Research, Inc.
    4. Sabourin, David & Baldwin, John R. & Smith, David, 2003. "Impact of Advanced Technology Use on Firm Performance in the Canadian Food Processing Sector," Economic Analysis (EA) Research Paper Series 2003012e, Statistics Canada, Analytical Studies Branch.
    5. Audretsch, David B & Elston, Julie Ann, 1994. "Does Firm Size Matter? Evidence on the Impacts of Liquidity Constraints on Firm Investment Behaviour in Germany," CEPR Discussion Papers 1072, C.E.P.R. Discussion Papers.
    6. Aled ab Iorwerth, . "Machines and the Economics of Growth," Working Papers-Department of Finance Canada 2005-05, Department of Finance Canada.
    7. Sabourin, David & Baldwin, John R., 1999. "Technology Adoption: A Comparison Between Canada and the United States," Analytical Studies Branch Research Paper Series 1998119e, Statistics Canada, Analytical Studies Branch.
    8. Lin, Zhengxi & Baldwin, John R., 2001. "Impediments to Advanced Technology Adoption for Canadian Manufacturers," Analytical Studies Branch Research Paper Series 2001173e, Statistics Canada, Analytical Studies Branch.
    9. Erik Brynjolfsson & Lorin M. Hitt, 2000. "Beyond Computation: Information Technology, Organizational Transformation and Business Performance," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 23-48, Fall.
    10. Bronwyn H. Hall, 2004. "Innovation and Diffusion," NBER Working Papers 10212, National Bureau of Economic Research, Inc.
    11. Harchaoui, Tarek M. & Tarkhani, Faouzi, 2005. "Qu’en est-il des externalités du capital des technologies de l’information?," L'Actualité Economique, Société Canadienne de Science Economique, vol. 81(1), pages 231-253, Mars-Juin.
    12. Elad Gafni, 2005. "The Diffusion and Adoption of Advanced Technologies in Canada: An Overview of the Issues," CSLS Research Reports 2005-05, Centre for the Study of Living Standards.
    13. John R. Baldwin & David Sabourin, 2002. "Advanced technology use and firm performance in Canadian manufacturing in the 1990s," Industrial and Corporate Change, Oxford University Press, vol. 11(4), pages 761-789, August.
    14. Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 1999. "Information Technology, Workplace Organization and the Demand for Skilled Labor: Firm-Level Evidence," NBER Working Papers 7136, National Bureau of Economic Research, Inc.
    15. Chowhan, James, 2005. "Who Trains? High-tech Industries or High-tech Workplaces?," The Canadian Economy in Transition 2005006e, Statistics Canada, Economic Analysis.
    16. Productivity Commission, 2004. "ICT Use and Productivity: A Synthesis from Studies of Australian Firms," Development and Comp Systems 0410005, EconWPA.
    17. Andrew Sharpe, 2004. "Ten Productivity Puzzles Facing Researchers," International Productivity Monitor, Centre for the Study of Living Standards, vol. 9, pages 15-24, Fall.
    18. 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.
    19. Nadim Ahmad, 2003. "Measuring Investment in Software," OECD Science, Technology and Industry Working Papers 2003/6, OECD Publishing.
    20. Dirk Pilat, 2005. "Canada's Productivity Performance in International Perspective," International Productivity Monitor, Centre for the Study of Living Standards, vol. 10, pages 24-44, Spring.
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