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Productivity Trends and Employment across Industries in Canada

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  • Pierre Mohnen
  • Thijs Ten Raa

Abstract

This paper addresses the paradox between an increasing share of employment and a lower productivity growth of Canadian services vis-à-vis the rest of the economy in the period spanning the three decades from 1961 to 1992. It attempts to reconcile this apparent contradiction with the so-called Baumol disease, which predicts a decline in the share of services given their relative price. In short, Canadian services suffer little from the Baumol disease when capital is taken into account. However, their share of domestic final demand does not keep pace with their employment and value added shares. Yet the service shares of domestic final demand do rise and this remains a puzzle to be explained. One explanation could be a shift of innovation towards services and, related to this, a shift of consumer preferences towards these new services. If R&D figures are anything to go by, they tend to bolster this explanation. Cette étude examine le paradoxe de la croissance relative de l'emploi et de la décroissance relative de la productivité dans les secteurs des services au Canada au cours de la période allant de 1961 à 1992. Ce phénomène est apparamment en contradiction avec le malaise de Baumol (Baumol disease), qui prédit au contraire une baisse de l'activité dans les services à cause de leur performance médiocre en matière de productivité, qui devrait se réfléter dans des prix relatifs plus élevés. En résumé, nous concluons que le malaise de Baumol dans les services au Canada est mineur une fois que l'on inclut le capital dans la mesure de la productivité. Par contre, la part des services dans la demande finale domestique ne suit pas l'évolution des parts de l'emploi et de la valeur ajoutée. Et pourtant, la part des services dans la demande finale domestique augmente et ceci reste une énigme. Une explication possible serait un déplacement de l'innovation vers les services et, relié à cela, un déplacement des préférences vers les services. Les données sur la distribution de la R-D, pour ce qu'elles valent, tendraient à soutenir cet argument.

Suggested Citation

  • Pierre Mohnen & Thijs Ten Raa, 2000. "Productivity Trends and Employment across Industries in Canada," CIRANO Working Papers 2000s-10, CIRANO.
  • Handle: RePEc:cir:cirwor:2000s-10
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    File URL: http://www.cirano.qc.ca/files/publications/2000s-10.pdf
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    References listed on IDEAS

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    1. Baumol, William J, 1972. "Macroeconomics of Unbalanced Growth: Reply," American Economic Review, American Economic Association, vol. 62(1), pages 150-150, March.
    2. Leamer, Edward E. & Levinsohn, James, 1995. "International trade theory: The evidence," Handbook of International Economics,in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 26, pages 1339-1394 Elsevier.
    3. Ten Raa, T. & Mohnen, P., 1998. "Sources of productivity growth : Technology, terms of trade and preference shifts," Discussion Paper 1998-105, Tilburg University, Center for Economic Research.
    4. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-1046, December.
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    Cited by:

    1. D'Agostino, Antonello & Serafini, Roberta & Ward-Warmedinger, Melanie E., 2006. "Sectoral Explanations of Employment in Europe: The Role of Services," IZA Discussion Papers 2257, Institute for the Study of Labor (IZA).
    2. Bonatti, Luigi & Felice, Giulia, 2008. "Endogenous growth and changing sectoral composition in advanced economies," Structural Change and Economic Dynamics, Elsevier, vol. 19(2), pages 109-131, June.

    More about this item

    Keywords

    Productivity; services; Baumol disease; innovation; Productivité; services; malaise de Baumol; innovation;

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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