Relative Multifactor Productivity Levels in Canada and the United States: A Sectoral Analysis

Canadian Productivity Review Research paper No. 19

45 Pages Posted: 19 Nov 2009

See all articles by John R. Baldwin

John R. Baldwin

Statistics Canada - Microeconomic Analysis Division

Wulong Gu

Government of Canada - Micro-Economic Analysis Division

Beiling Yan

Statistics Canada

Date Written: July 21, 2008

Abstract

This paper has three main objectives. First, it examines the level of multifactor productivity (MFP) in Canada relative to that of the United States for the 1994-to-2003 period. Second, it examines the relative importance of differences in capital intensity and MFP in accounting for the labour productivity differences between the two countries. Third, it traces the overall MFP difference between Canada and the United States to its industry origins and estimates the contributions of the goods, services and engineering sectors to the overall MFP gap.

Our main findings are as follows. First, the overall capital intensity is as high in Canada as in the United States; but there are considerable differences in Canada’s capital intensity across asset classes. Canada has considerably less machinery and equipment, about the same amount of buildings and considerably more engineering construction. Second, most of the differences in labour productivity between Canada and the United States are due to the differences in MFP. Third, our industry results show that the levels of labour productivity and MFP in the goods and the engineering sectors are closer to those of the United States. But, the level of labour and multifactor productivity in the services sector is much lower in Canada. The lower levels of labour productivity and MFP in the Canadian services sector account for most of the overall productivity level difference between the two countries.

Keywords: productivity, capital intensity, Canada–United States comparison

JEL Classification: D24, J24, O47, E22, P51

Suggested Citation

Baldwin, John R. and Gu, Wulong and Yan, Beiling, Relative Multifactor Productivity Levels in Canada and the United States: A Sectoral Analysis (July 21, 2008). Canadian Productivity Review Research paper No. 19, Available at SSRN: https://ssrn.com/abstract=1509494 or http://dx.doi.org/10.2139/ssrn.1509494

John R. Baldwin

Statistics Canada - Microeconomic Analysis Division ( email )

24 Floor - R.H.Coats Building
Tunney's Pasture
Ottawa, Ontaria K1A 0T6
Canada
613-951-8588 (Phone)
613-951-5403 (Fax)

Wulong Gu (Contact Author)

Government of Canada - Micro-Economic Analysis Division ( email )

24 Floor - R.H.Coats Building
Tunney's Pasture
Ottawa, Ontaria K1A 0T6
Canada

Beiling Yan

Statistics Canada ( email )

Ottawa, Ontario
Canada
613-951-5403 (Phone)

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