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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. 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.
    2. Alexander Murray, 2016. "Partial versus Total Factor Productivity: Assessing Resource Use in Natural Resource Industries in Canada," CSLS Research Reports 2016-20, Centre for the Study of Living Standards.
    3. 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.
    4. Cao, Shutao, 2017. "Accounting for productivity growth in a small open economy: Sector-specific technological change and relative prices of trade," Working Paper Series 20152, Victoria University of Wellington, School of Economics and Finance.
    5. Erwin Diewert & Hui Wei, 2017. "Getting Rental Prices Right for Computers: Reconciling Different Perspectives on Depreciation," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 63, pages 149-168, February.
    6. 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.
    7. 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.
    8. 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.
    9. Kenneth G. Stewart & Jiang Li, 2018. "Are factor biases and substitution identifiable? The Canadian evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 51(2), pages 528-548, May.
    10. W. Diewert, 2014. "US TFP growth and the contribution of changes in export and import prices to real income growth," Journal of Productivity Analysis, Springer, vol. 41(1), pages 19-39, February.
    11. W. Erwin Diewert & Kevin J. Fox, 2017. "Decomposing Value Added Growth into Explanatory Factors," Discussion Papers 2017-02, School of Economics, The University of New South Wales.
    12. 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.
    13. 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.
    14. Xi Wei & Cheng Xiran, 2018. "The Difference of Capital Input and Productivity in Service Industries: Based on Four Stages Bootstrap-DEA Model," Journal of Systems Science and Information, De Gruyter, vol. 6(4), pages 320-335, August.
    15. Talan İşcan, 2015. "Windfall Resource Income, Productivity Growth, and Manufacturing Employment," Open Economies Review, Springer, vol. 26(2), pages 279-311, April.
    16. Kenneth G. Stewart & Jiang Li, 2018. "Are factor biases and substitution identifiable? The Canadian evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 51(2), pages 528-548, May.

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