Whatever Happened to Canada-United States Economic Growth and Productivity Performance in the Information Age?

Abstract

Productivity growth in the U.S. economy jumped during the second half of the 1990s, a resurgence that the literature linked to information technology use. We contribute to this debate in two ways. First, using the most comparable Canadian and U.S. data available, we quantify in a comprehensive way the contributions of information technology to output, capital input, and productivity performance. Second, we examine the extent to which information technology producing and information technology-using industries have contributed to the aggregate multifactor productivity revival. Our results suggest that while information technology is indeed the story in the U.S. productivity revival, it is only part of it in the Canadian context. The U.S. labour productivity revival is primarily attributable to information technology capital deepening and multifactor productivity gains of information technology-producing industries, a finding that somewhat contrasts with the common U.S. wisdom. The Canadian evidence points towards the importance of multifactor productivity gains in information technology-using industries as a major source of productivity acceleration. These results stand even after a 'correction' for the methodological differences in the measurement of information technology prices at the industry level, thereby indicating important differences in the economic structures between the two countries.

Keywords: productivity, information technology, prices

JEL Classification: E3, D24, O14