Why does the Canadian productivity lag behind that of the US?

Résumé du document

"Productivity is our economic destiny," says Andrew Sharpe, Director of the Centre for the Study of Living Standards in Canada. Productivity is indeed important because it is related to the level of living standards (defined as GDP per capita) and the economic well-being of a specific country. As a result, when productivity rises, both factors rise accordingly. The most common measure used to calculate a country's productivity and its economic performances is the labor productivity, measured in terms of the output per hours worked, which in turn evaluates the effectiveness of the country's firms. A recent study by The Canadian Productivity Review suggests that "since the early 1980s, the U.S labor productivity growth has exceeded Canadian growth and the gap has particularly widened after 2000?. The purpose of this essay is therefore not to prove that the Canadian productivity lags behind that of the U.S, but to present and examine the most reasonable explanations for this phenomenon. It is interesting to specifically analyze the post-2000 period, during which the gap has significantly widened.

Extraits

[...] In fact, the new trade opportunities created by the FTA in 1984 and later NAFTA in 1994, helped Canada record an exceptional growth in trade since the beginning of the 1990's. Further trade liberalisation agreements, analysts say, should help Canada increase its productivity levels, through an increased specialisation of labour processes and an increased competition for domestic companies. Conclusion We have been able to characterise in detail, with real life examples, one of the features that explains why the Canadian productivity lags behind that of the US. [...]

[...] Both countries have similar industrial structures, are members of the G8, and have the largest amount of bi-lateral trade between them. On the other hand, cultural borders (P.Goff - 2000) seem to be non-existent between two countries that have never been at war in the past 200 years. “Proximity to the US has further exacerbated the difficulties associated with defining a Canadian identity”. Table 1 Source: Statistics Canada, 14/09/07 Labour Productivity, hourly compensation and unit labour cost http://www.statcan.ca/Daily/English/070914/d070914b.htm In the next part of this essay, I will lay out what seems to be the most significant factor which explains this productivity gap. [...]

[...] ICT also facilitates flatter and involvement-oriented management which allows workers to access human capital of other workers more easily. This in turn increases productivity levels (Gera and Gu 2004). The data shows that the gap between US and Canadian productivity can partly be accounted for the gap in ICT Investment that has risen since the 1980's. Chart 1 and 2 summarize these facts simply. Average annual growth of ICT Investment in the business sector in 2004 has been of and in the US and Canada respectively. [...]

[...] This phenomenon that could be applied to many oil extracting companies, has, amongst other factors, resulted in a noticeable increase of in the total number of hours worked on some fields, which has led to a drop in productivity in these fields[5]. The slowdown in the natural resources sector productivity has important repercussion on a national scale, since this industry has a predominant position in the Canadian economy. Andrew Sharpe actually says it “accounts for of the overall productivity slowdown in Canada between 1997-2000 and 2000-2004[6]. As ICT is seen as capital input, it is also necessary to point out the material aspect of the technology. [...]

[...] The second part examines to what extent the Information and Communication Technologies (ICT) in Canada are responsible for the growth slowdown. Sub-sections analyse the role of innovation and multifactor productivity (MFP) in the implementation of ICT. Overview The recent Canadian economical data are compelling (Rao, Sharpe and Smith 2005). Table 1 shows that after accelerating in the 1990's at the same rate as that of the U.S, productivity growth has stagnated to in the overall 2000-2006 period, and to 0 in 2004. What makes this topic even more interesting is that both countries share many similarities since 1990 and beyond. [...]