Long-term Productivity Growth in Manufacturing in Canada and the United States, 1961 to 2003

In this paper, we provide an international comparison of the growth in Canadian and U.S. manufacturing industries over the 1961-to-2003 period. We find that average annual growth rates of labour productivity growth were almost identical in the Canadian and U.S. manufacturing sectors during this period. But the sources of labour productivity growth differed in the two countries. Intermediate input deepening was a more important source of labour productivity growth in Canada than in the United States, while investment in capital and multifactor productivity (MFP) growth were more important in the United States than in Canada. After 1996, labour productivity growth in Canada was lower than in the United States. The post-1996 slower labour productivity growth in Canada relative to the United States was due to slower growth in MFP and slower growth in capital intensity. The slower MFP growth in Canada accounted for 60% of Canada - United States labour productivity growth difference, and slower growth in capital intensity accounted for 30%. The slower MFP growth in the Canadian manufacturing sector relative to that of the United States after 1996 was due to lower MFP growth in the computer and electronic products industry. The slower growth in capital'labour ratio in the Canadian manufacturing compared with the United States after 1996 is related to the changes in relative prices of capital and labour inputs in the two countries.