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What Explains the Canada-US Labour Productivity Gap?

  • Someshwar Rao
  • Jianmin Tang
  • Weimin Wang

This paper analyzes the reasons for the Canada-US labour productivity gap, which is mainly explained by the multifactor productivity (MFP) gap. Based on panel data for 41 industries, the regression results show that differences in the machinery and equipment (M&E) capital-labour ratio, trade openness, and capacity utilization explain differences in the Canada-US MFP gap across industries. The M&E capital intensity gap is the dominant source of the MFP gap. Lower wages, R&D intensity, and skills levels, as well as higher investment goods prices in Canada are the major determinants of the M&E capital intensity gap.

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Article provided by University of Toronto Press in its journal Canadian Public Policy.

Volume (Year): 34 (2008)
Issue (Month): 2 (June)
Pages: 163-192

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Handle: RePEc:cpp:issued:v:34:y:2008:i:2:p:163-192
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  1. John Duffy & Chris Papageorgiou & Fidel Perez-Sebastian, 2004. "Capital-Skill Complementarity? Evidence from a Panel of Countries," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 327-344, February.
  2. Maurizio Baussola, 2000. "The Causality Between R&D And Investment," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 9(4), pages 385-399.
  3. Tanguay, Marc & Baldwin, John R. & Wong, Fanny & Maynard, Jean-Pierre & Yan, Beiling, 2005. "A Comparison of Canadian and U.S. Productivity Levels: An Exploration of Measurement Issues," Economic Analysis (EA) Research Paper Series 2005028e, Statistics Canada, Analytical Studies Branch.
  4. Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 2002. "Information Technology, Workplace Organization, And The Demand For Skilled Labor: Firm-Level Evidence," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 339-376, February.
  5. Peter K. Clark, 1993. "Tax Incentives and Equipment Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(1), pages 317-347.
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