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Driving forces of the Canadian economy: an accounting exercise

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  • Simona E. Cociuba
  • Alexander Ueberfeldt

Abstract

This paper analyzes the Canadian economy for the post-1960 period. It uses an accounting procedure developed in Chari, Kehoe, and McGrattan (2006). The procedure identifies accounting factors that help align the predictions of the neoclassical growth model with macroeconomic variables observed in the data. The paper finds that total factor productivity and the consumption-leisure trade-off?the productivity and labor factors?are key to understanding the changes in output, labor supply and labor productivity observed in the Canadian economy. The paper performs a decomposition of the labor factor for Canada and the United States. It finds that the decline in the gender wage gap is a major driving force of the decrease in the labor market distortions. Moreover, the milder reduction in the labor market distortions observed in Canada, compared to the U.S., is due to a relative increase in effective labor taxes in Canada.

Suggested Citation

  • Simona E. Cociuba & Alexander Ueberfeldt, 2008. "Driving forces of the Canadian economy: an accounting exercise," Globalization Institute Working Papers 06, Federal Reserve Bank of Dallas.
  • Handle: RePEc:fip:feddgw:06
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    References listed on IDEAS

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    1. Larry E. JONES & Rodolfo E. MANUELLI & Ellen R. McGRATTAN, 2015. "Why Are Married Women Working so much ?," JODE - Journal of Demographic Economics, Cambridge University Press, vol. 81(1), pages 75-114, March.
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    4. Goldin, Claudia, 1992. "Understanding the Gender Gap: An Economic History of American Women," OUP Catalogue, Oxford University Press, number 9780195072709.
    5. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2007. "Business Cycle Accounting," Econometrica, Econometric Society, vol. 75(3), pages 781-836, May.
    6. Carlstrom, Charles T & Fuerst, Timothy S, 1997. "Agency Costs, Net Worth, and Business Fluctuations: A Computable General Equilibrium Analysis," American Economic Review, American Economic Association, vol. 87(5), pages 893-910, December.
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    8. Someshwar Rao & Jianmin Tang & Weimin Wang, 2004. "Measuring the Canada-U.S. Productivity Gap: Industry Dimensions," International Productivity Monitor, Centre for the Study of Living Standards, vol. 9, pages 3-14, Fall.
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    14. Rotemberg, Julio J. & Woodford, Michael, 1999. "The cyclical behavior of prices and costs," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 16, pages 1051-1135, Elsevier.
    15. Gary D. Hansen & Edward C. Prescott, 2005. "Capacity constraints, asymmetries, and the business cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(4), pages 850-865, October.
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    Cited by:

    1. Juan Carlos Conesa & Pau S. Pujolas, 2019. "The Canadian productivity stagnation, 2002–2014," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 52(2), pages 561-583, May.
    2. Simona Cociuba & Alexander Ueberfeldt, 2012. "Heterogeneity and Long-Run Changes in U.S. Hours and the Labor Wedge," University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers 20124, University of Western Ontario, Centre for Human Capital and Productivity (CHCP).
    3. Dooyeon Cho & Antonio Doblas-Madrid, 2013. "Business Cycle Accounting East and West: Asian Finance and the Investment Wedge," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(4), pages 724-744, October.
    4. Jacek Rothert & Mohammad Rahmati, 2014. "Business Cycle Accounting in a Small Open Economy," Departmental Working Papers 46, United States Naval Academy Department of Economics.
    5. Keisuke Otsu, 2012. "How well can business cycle accounting account for business cycles?," Economics Bulletin, AccessEcon, vol. 32(2), pages 1774-1784.
    6. Dooyeon Cho & Dong-Eun Rhee, 2015. "An assessment of inflation targeting in a quantitative monetary business cycle framework: evidence from four early adopters," Applied Economics, Taylor & Francis Journals, vol. 47(32), pages 3395-3413, July.
    7. Otsu Keisuke, 2010. "A Neoclassical Analysis of the Asian Crisis: Business Cycle Accounting for a Small Open Economy," The B.E. Journal of Macroeconomics, De Gruyter, vol. 10(1), pages 1-39, July.

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    More about this item

    Keywords

    Economic conditions - Canada; Productivity - Canada; Labor productivity; Labor supply;
    All these keywords.

    JEL classification:

    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada

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