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The Widening Canada-US Productivity Gap in Manufaturing

Author

Listed:
  • Jeffrey I. Bernstein
  • Richard G. Harris
  • Andrew Sharpe

Abstract

In this article, Jeffrey I. Bernstein of Carleton University, Richard G. Harris from Simon Fraser University, and Andrew Sharpe from the Centre for the Study of Living Standards provide a comprehensive analysis of the widening of the Canada-US manufacturing productivity gap. Since 1994, labour productivity growth in manufacturing in the United States has greatly exceeded that recorded in Canada. Output per hour in Canada fell 20 percentage points from 87 per cent of the US level in 1994 to 67 per cent in 2001. This development has been responsible for most of the widening of the aggregate Canada-US labour productivity gap. The authors find that the growth in the gap largely reflects the acceleration of productivity growth in US high-tech manufacturing sector. The Canadian high-sector is smaller than its US counterpart and experienced much weaker productivity growth. It is estimated that these two factors themselves account for 70 per cent of the widening of the gap over the 1994-2000 period. Faster growth in capital intensity of production in the United States also played a complementary role in the growth of the gap, a development in part fostered by the greater increase in the price of labour relative to that of investment goods in the United States than in Canada. This was due to slower labour compensation growth and, to a lesser extent, a smaller decline in the price of investment goods in Canada. The depreciation of the value of the Canadian dollar relative to the US dollar played some role in this latter development. The authors conclude that Canadian economic policies have not directly contributed in any significant manner to the widening of the gap.

Suggested Citation

  • Jeffrey I. Bernstein & Richard G. Harris & Andrew Sharpe, 2002. "The Widening Canada-US Productivity Gap in Manufaturing," International Productivity Monitor, Centre for the Study of Living Standards, vol. 5, pages 3-22, Fall.
    • Handle: RePEc:sls:ipmsls:v:5:y:2002:1
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    References listed on IDEAS

    as
    1. John R Baldwin & Ron S Jarmin & Jianmin Tang, 2002. "The Trend to Smaller Producers in Manufacturing in Canada and the U.S," Working Papers 02-06, Center for Economic Studies, U.S. Census Bureau.
    2. Baldwin, John R. Jarmin , Ron S. Tang, Jianmin, 2002. "The Trend to Smaller Producers in Manufacturing: A Canada/U.S. Comparison," Economic Analysis (EA) Research Paper Series 2002003e, Statistics Canada, Analytical Studies Branch.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Baldwin, John R. Gu, Wulong, 2005. "Global Links: Multinationals, Foreign Ownership and Productivity Growth in Canadian Manufacturing," The Canadian Economy in Transition 2005009e, Statistics Canada, Economic Analysis Division.
    2. Someshwar Rao & Andrew Sharpe & Jianmin Tang, 2004. "Productivity Growth in Service Industries: A Canadian Success Story," CSLS Research Reports 2004-01, Centre for the Study of Living Standards.
    3. Andrew Sharpe, 2007. "Lessons for Canada from International Productivity Experience," International Productivity Monitor, Centre for the Study of Living Standards, vol. 14, pages 20-37, Spring.
    4. John R. Baldwin & W. Mark Brown & Wulong Gu, 2012. "Geographic market access and the effects of trade on length of production run, product diversity and plant scale of Canadian manufacturing plants, 1974--1999," Journal of Economic Geography, Oxford University Press, vol. 12(2), pages 455-484, March.
    5. Centre for the Study of Living Standards, 2003. "Productivity Trends in Natural Resources Industries in Canada," CSLS Research Reports 2003-01, Centre for the Study of Living Standards.
    6. Someshwar Rao & Jianmin Tang & Weimin Wang, 2003. "Canada's Recent Productivity Record and Capital Accumulation," International Productivity Monitor, Centre for the Study of Living Standards, vol. 7, pages 24-38, Fall.
    7. Don Drummond & Evan Capeluck & Matthew Calver, 2015. "The Key Challenge for Canadian Public Policy: Generating Inclusive and Sustainable Economic Growth," CSLS Research Reports 2015-11, Centre for the Study of Living Standards.
    8. Jeremy Smith, 2004. "Assessing Aggregate Labour Productivity Trends in Canada and the United States: Total Economy versus Business Sector Perspectives," International Productivity Monitor, Centre for the Study of Living Standards, vol. 8, pages 47-58, Spring.
    9. Jeremy Smith, 2004. "Aggregate Labour Productivity Growth in Canada and the United States: Definitions, Trends and Measurement Issues," CSLS Research Reports 2004-04, Centre for the Study of Living Standards.
    10. Lin Shao & Rongsheng Tang, 2021. "Allocative Efficiency and Aggregate Productivity Growth in Canada and the United States," Staff Working Papers 21-1, Bank of Canada.
    11. Andrew Sharpe, 2003. "Why are Americans More Productive than Canadians?," International Productivity Monitor, Centre for the Study of Living Standards, vol. 6, pages 19-37, Spring.

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    More about this item

    Keywords

    Canada; United States; Manufacturing; Labor Productivity; Labour Productivity; Productivity; Employment; Capital Intensity; Technological Change; Innovation; High-Tech; Capacity; Cyclical; Investment; Relative Price; Relative Price of Labour; Relative Price of Investment;
    All these keywords.

    JEL classification:

    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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