Productivity and Innovation: The MFP Puzzle Considered Through the Lens of Trade Theory

6 Pages Posted: 13 Apr 2016 Last revised: 25 Oct 2016

Dan Ciuriak

Ciuriak Consulting Inc.; C.D. Howe Institute; Centre for International Governance Innovation (CIGI); BKP Development Research & Consulting GmbH

Date Written: April 9, 2016

Abstract

Productivity agendas often struggle because they target something that is not explicitly measured – a residual in a growth accounting framework that cannot be directly addressed by policy -- an elusive unknown with an attractive name: multifactor productivity (MFP) There is no mystery about where productivity comes from in modern trade theory -- it comes from innovation and entry into trade and is measured straightforwardly by profitability of firms and their market share. Seen through a trade lens, Canada's disappointing MFP outcomes can be readily understood as the outcome of its industrial policy choices, implemented in a macro- and microeconomic setting that featured biases against the emergence of smaller dynamic firms.

Keywords: Productivity, MFP, Innovation, Trade Theory, Heterogeneous Firms, Canada

JEL Classification: F14, L10, H40

Suggested Citation

Ciuriak, Dan, Productivity and Innovation: The MFP Puzzle Considered Through the Lens of Trade Theory (April 9, 2016). Available at SSRN: https://ssrn.com/abstract=2761414

Dan Ciuriak (Contact Author)

Ciuriak Consulting Inc. ( email )

83 Stewart St.
Ottawa, Ontario K1N 6H9
Canada

C.D. Howe Institute ( email )

67 Yonge St., Suite 300
Toronto, Ontario M5E 1J8
Canada

Centre for International Governance Innovation (CIGI) ( email )

57 Erb Street West
Waterloo, Ontario N2L 6C2
Canada

BKP Development Research & Consulting GmbH ( email )

Romanstrasse 74
München, 80639
Germany

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