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Estimating Capital Input for Measuring Business Sector Multifactor Productivity Growth in Canada: Response to Diewert and Yu

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  • Wulong Gu

Abstract

Diewert and Yu estimate that multifactor productivity grew at a 1.0 per cent average annual rate in the Canadian business sector from 1961 to 2011, compared to Statistics Canada’s Canadian Productivity Program estimate of 0.3 per cent. The major reason for this difference is that Diewert and Yu find capital services grew at 3.0 per cent per year, compared to Statistics Canada’s estimate of 4.8 per cent. This article identifies and discusses the three reasons for this discrepancy. First, while the Canadian Productivity Program aggregates capital services across industries to derive the capital input measure at the level of the business sector, Diewert and Yu use a top-down approach and directly compute capital and labour input series at the business sector level. Second, there are differences in the way the price of capital services is computed. Third, the Canadian Productivity Program bases its capital measures on a more detailed list of assets than Diewert and Yu. Statistics Canada estimates follow international guidelines and practices adopted by other statistical agencies in order to make estimates internationally comparable.

Suggested Citation

  • Wulong Gu, 2012. "Estimating Capital Input for Measuring Business Sector Multifactor Productivity Growth in Canada: Response to Diewert and Yu," International Productivity Monitor, Centre for the Study of Living Standards, vol. 24, pages 49-62, Fall.
  • Handle: RePEc:sls:ipmsls:v:24:y:2012:4
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    File URL: http://www.csls.ca/ipm/24/IPM-24-Gu.pdf
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    References listed on IDEAS

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    1. Baldwin, John R. Fisher, Anthony Gu, Wulong Lee, Frank C Robidoux, Benoît, 2008. "Capital Intensity in Canada and the United States, 1987 to 2003," The Canadian Productivity Review 2008018e, Statistics Canada, Economic Analysis Division.
    2. Dale W. Jorgenson, 2012. "The World KLEMS Initiative," International Productivity Monitor, Centre for the Study of Living Standards, vol. 24, pages 5-19, Fall.
    3. Baldwin, John R. & Gu, Wulong & Macdonald, Ryan, 2012. "Intangible Capital and Productivity Growth in Canada," The Canadian Productivity Review 2012029e, Statistics Canada, Economic Analysis Division.
    4. Baldwin, John R. Gu, Wulong Lafrance, Amélie Macdonald, Ryan, 2009. "Investment in Intangible Assets in Canada: R&D, Innovation, Brand, and Mining, Oil and Gas Exploration Expenditures," The Canadian Productivity Review 2009026e, Statistics Canada, Economic Analysis Division.
    5. Baldwin, John R. Gu, Wulong, 2007. "Investment and Long-term Productivity Growth in the Canadian Business Sector, 1961 to 2002," The Canadian Productivity Review 2007006e, Statistics Canada, Economic Analysis Division.
    6. Baldwin, John R. Maynard, Jean-Pierre Tanguay, Marc Wong, Fanny 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.
    7. Macdonald, Ryan, 2007. "Estimating TFP in the Presence of Outliers and Leverage Points: An Examination of the KLEMS Dataset," Economic Analysis (EA) Research Paper Series 2007047e, Statistics Canada, Analytical Studies Branch.
    8. Macdonald, Ryan, 2008. "An Examination of Public Capital's Role in Production," Economic Analysis (EA) Research Paper Series 2008050e, Statistics Canada, Analytical Studies Branch.
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    Cited by:

    1. Cao, Shutao, 2017. "Accounting for productivity growth in a small open economy: Sector-specific technological change and relative prices of trade," Working Paper Series 6203, Victoria University of Wellington, School of Economics and Finance.
    2. Talan İşcan, 2015. "Windfall Resource Income, Productivity Growth, and Manufacturing Employment," Open Economies Review, Springer, vol. 26(2), pages 279-311, April.
    3. Kenneth G. Stewart & Jiang Li, 2018. "Are factor biases and substitution identifiable? The Canadian evidence," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 51(2), pages 528-548, May.
    4. Don Drummond & Annette Ryan & Michael R. Veall, 2013. "Improving Canada's Productivity Performance: The Potential Contribution of Firm-level Productivity Research," International Productivity Monitor, Centre for the Study of Living Standards, vol. 26, pages 86-93, Fall.
    5. Michael J. Harper & Alice O. Nakamura & Lu Zhang, 2012. "Difficulties Assessing Multifactor Productivity for Canada," International Productivity Monitor, Centre for the Study of Living Standards, vol. 24, pages 76-84, Fall.
    6. Matthew Calver and Alexander Murray, 2016. "Decomposing Multifactor Productivity Growth in Canada by Industry and Province, 1997-2014," CSLS Research Reports 2016-19, Centre for the Study of Living Standards.
    7. Shutao Cao & Sharon Kozicki, 2017. "Real GDI, Productivity, and the Terms of Trade in Canada," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 63, pages 134-148, February.
    8. Paul Schreyer, 2012. "Comment on "Estimating Capital Input for Measuring Business Sector Multifactor Productivity Growth in Canada"," International Productivity Monitor, Centre for the Study of Living Standards, vol. 24, pages 73-75, Fall.
    9. Wulong Gu & Beiling Yan, 2017. "Productivity Growth and International Competitiveness," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 63, pages 113-133, February.

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