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Canada's Recent Productivity Record and Capital Accumulation

  • Someshwar Rao

    ()

  • Jianmin Tang
  • Weimin Wang

In this article, Someshwar Rao, Jiamin Tang and Weimin Wang of Industry Canada examine the impact of capital accumulation on Canada's recent productivity record. A key finding is that the widening of the Canada-U.S. labour productivity gap in both the business sector and in manufacturing in the second half of the 1990s was largely due to the widening of the capital intensity gap between the two countries. Indeed, the authors find that in the business sector multifactor productivity growth in the two countries was virtually identical at around 2 per cent per year in the 1995-2000 period. This situation is explained by the marked slowdown in the pace of capital intensity growth in Canada after 1995. This development reflected the increased cost of capital relative to labour in Canada, in turn the result of higher prices for investment goods because of the depreciation of the Canadian dollar and low wage increases due to high unemployment. With the recent appreciation of the Canadian dollar and the expected decline in unemployment, the authors project in the medium-term a narrowing of Canada's capital intensity gap with the United States and hence a reduction in the labour productivity gap.

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Article provided by Centre for the Study of Living Standards in its journal International Productivity Monitor.

Volume (Year): 7 (2003)
Issue (Month): (Fall)
Pages: 24-38

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Handle: RePEc:sls:ipmsls:v:7:y:2003:2
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  1. Andrew Sharpe, 2003. "Why Are Americans More Productive Than Canadians?," CSLS Research Reports 2003-03, Centre for the Study of Living Standards.
  2. Greenwood, Jeremy & Hercowitz, Zvi & Krusell, Per, 1997. "Long-Run Implications of Investment-Specific Technological Change," American Economic Review, American Economic Association, vol. 87(3), pages 342-62, June.
  3. Jack Mintz, 1995. "Corporation tax: a survey," Fiscal Studies, Institute for Fiscal Studies, vol. 16(4), pages 23-68, November.
  4. Someshwar Rao & Ashfaq Ahmad & William Horsman & Phaedra Kaptein-Russell, 2001. "The Importance of Innovation for Productivity," International Productivity Monitor, Centre for the Study of Living Standards, vol. 2, pages 11-18, Spring.
  5. Someshwar Rao & Jianmin Tang & Weimin Wang, 2002. "The Importance of Skills for Innovation and Productivity," International Productivity Monitor, Centre for the Study of Living Standards, vol. 4, pages 15-26, Spring.
  6. Jeffrey I. Bernstein & Richard G. Harris & Andrew Sharpe, 2002. "The Widening Canada-US Productivity Gap in Manufaturing," International Productivity Monitor, Centre for the Study of Living Standards, vol. 5, pages 3-22, Fall.
  7. Vijay Jog & Jianmin Tang, 2001. "Tax Reforms, Debt Shifting and Tax Revenues: Multinational Corporations in Canada," International Tax and Public Finance, Springer, vol. 8(1), pages 5-25, January.
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