The Canada-US ICT Investment Gap: An Update

In 2005, the CSLS published a report that examined spending on information and communication technology (ICT) in Canada and the United States between 1987 and 2004. It found that Canadian firms lagged considerably behind US firms in ICT spending and that this situation accounted to some extent for the lower labour productivity growth experienced in Canada. This report provides an overview of the latest developments using the most recent update of the CSLS ICT database. It finds that ICT investment spending in the United States in 2005 and 2006 continued to outpace that in Canada, increasing an average of 5.6 per cent annually in the United States compared to 3.3 per cent in Canada when expressed in current dollars. Following this trend, nominal ICT investment per worker in domestic currencies also grew faster in the United States than in Canada in 2005 and 2006, 3.7 per cent versus 1.6 per cent. The recent increase in the Canadian dollar, however, lead to a sharper decrease in ICT prices in Canada than in the United States over the 2004-2006 period. This in turn led to an increase in the level of PPP-adjusted ICT investment per worker in Canada relative to the United States from 56.5 per cent in 2004 to 58.0 per cent in 2006, continuing the positive trend started in 2000 when it stood at 49.0 per cent. While Canada’s steady relative improvement since 2000 in terms of ICT investment per worker is encouraging, the low relative level of ICT investment per worker remains problematic and should be of concern to policy-makers as ICT investment is a key driver of productivity growth.