IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Machinery & Equipment Investment and Growth: Evidence from the Canadian Manufacturing Sector

Listed author(s):
  • Tahir A. Abdi
Registered author(s):

    New Growth Theory points to three potential influences on output and productivity growth – investment in human capital, R&D, and investment in machinery and equipment (M&E). However, much of the literature focuses on human capital and R&D as sources of growth. Few efforts have been made to estimate the impact of M&E investment. This paper presents empirical models that endeavour to fill this gap. Using panel data on 20 Canadian manufacturing industries (1961-1997) and time-series data (1961-2000) for the entire Canadian manufacturing sector, this paper finds that the elasticities of output with respect to M&E capital stock and M&E investment are well above capital’s share of national income suggested by a constant returns to scale Cobb Douglas production function. However, the coefficient on labour is near its income share. The results also suggest that M&E investment is not the only source of growth because the elasticity of output with respect to structures investment is also well above its income share, indicating the possible existence of complementarities between the two types of capital. La Nouvelle théorie de croissance identifie trois sources potentielles qui peuvent influencer la croissance de l’output et de la productivité – l’investissement en capital humain, la recherche et le développement, et l'investissement en machines et matériel. Toutefois, la majorité de la littérature se concentre sur les deux premières sources citées, peu d'efforts ayant été faits pour estimer l'impact de l'investissement en machines et matériel. Cet papier présente des modèles empiriques qui tentent de combler à cette lacune. En utilisant des données de panel pour 20 industries canadiennes (1961-1997) et des séries chronologiques (1961-2000) pour le secteur manufacturier canadien, nous trouvons que les élasticités de l’output par rapport au stock de capital en machines et matériel et à l'investissement en machines et matériel dépasse de loin la part du capital dans le revenu national suggérée par une fonction de production Cobb Douglas à rendements d’échelle constants. Cependant, le coefficient de la main d’œuvre est, lui, près de sa part du revenu. Nos résultats suggèrent également que l'investissement en machines et matériel ne soit pas la seule source de croissance car l'élasticité de l’output par rapport à l'investissement en structures est également bien au-dessus de sa part du revenu, indiquant l'existence possible de complémentarités entre les deux types de capital.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Paper provided by Department of Finance Canada in its series Working Papers-Department of Finance Canada with number 2004-04.

    in new window

    Date of creation:
    Handle: RePEc:fca:wpfnca:2004-04
    Contact details of provider: Postal:
    140 O'Connor St., Ottawa, K1A 0G5

    Phone: 613-992-1573
    Web page:

    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:fca:wpfnca:2004-04. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gustavo Durango)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.