Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Productivity Performance and Government Policy Andrew Sharpe Executive Director, Centre for the Study of Living Standards Annual Meeting of the Canadian Economics Association Laval University Quebec, Quebec Saturday, May 29, 2010 Outline of Presentation I Canadian Productivity Performance Overall Productivity Trends A Growth Accounting Perspective An Industry Perspective A Provincial Perspective Impact of the Reallocation of Labour II Productivity Drivers and the State of Policies Affecting Productivity Investment Innovation Human Capital Macroeconomic Framework Policies Microeconomic Framework Policies III Policy Priorities for Improved Productivity in Canada 2 Real Output per Hour Growth, Business Sector, Canada and the United States, Per Cent, 1947-2009 Average Annual Rates 3 4 % Relative Labour Productivity Levels in the Total Economy in Canada, 1961-2009 (Canada as % of the United States) 100 95 90 85 80 75 70 65 1947 1951 1955 1959 1963 1967 Source: CSLS Canada-US Productivity Database 5 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 Chart 3: GDP per Hour Worked Growth in OECD Countries, 2000-2007 (Compound Annual Rate of Growth, Per Cent) Slovak Republic Czech Republic South Korea Turkey Poland Greece Iceland Ireland Sweden Finland United Kingdom Hungary United States Japan Australia Norway Germany New Zealand France Luxembourg Canada Netherlands Denmark Switzerland Belgium Austria Portugal Spain Mexico Italy 5.1 4.6 4.5 3.9 3.4 3.1 3.0 2.8 2.3 2.3 2.3 2.1 2.0 1.9 1.7 1.6 1.3 1.3 1.2 1.2 1.2 1.1 1.0 1.0 0.9 0.9 0.9 0.9 0.7 0.0 -0.5 6 0.5 1.5 Source: Groningen Growth and Development Centre: www.ggdc.net. 2.5 3.5 4.5 5.5 Productivity Elasticity, Business Sector, Canada and the United States, 1947-2007 1.2 Canada United States 1.00 1.0 0.8 0.80 0.79 0.68 0.61 0.6 0.47 0.51 0.42 0.50 0.45 0.56 0.38 0.4 0.2 0.0 47-73 73-00 73-89 89-96 96-00 00-07 Sources: GDP in chained dollars and total hours worked from the Productivity and Costs Program of the Bureau of Labor Statistics for the United States, and annual averages of quarterly estimates from the Productivity Program Database of Statistics Canada for Canada. 7 Sources of Labour Productivity Growth in the Canadian Business Sector, 1973-2000 and 20002007 Post-2000 1973-2000 8 2000-2007 Change B-A A B Average Annual Rate of Growth Output 3.35 2.59 -0.76 Total hours 1.66 1.51 -0.15 Labour composition 0.60 0.54 -0.06 Capital services 4.65 3.90 -0.75 Capital stock 2.86 2.49 -0.36 Capital composition 1.75 1.35 -0.39 ICT capital services 19.56 10.17 -9.38 Non-ICT capital services 3.54 3.24 -0.31 Capital services intensity 2.94 2.35 -0.59 ICT cap. serv. Intensity 17.60 8.53 -9.08 Non-ICT cap. serv. Intensity 1.85 1.70 -0.16 Average Annual Percentage Point Contributions to Labour Productivity Growth Labour productivity 1.66 1.06 -0.60 Labour composition 0.36 0.31 -0.05 Capital services intensity 1.15 1.01 -0.14 Capital stock intensity 0.70 0.68 -0.02 Capital composition intensity 0.43 0.32 -0.11 ICT cap. serv. Intensity 0.46 0.34 -0.13 Non-ICT cap. serv. Intensity 0.67 0.66 -0.01 Multifactor productivity 0.15 -0.26 -0.41 Average Annual Percent Contributions to Labour Productivity Growth Labour productivity 100.0 100.0 100.0 Labour composition 21.7 29.6 7.8 Capital services intensity 68.9 95.2 22.8 Capital stock intensity 42.2 64.3 3.5 Capital composition intensity 25.9 30.3 18.2 ICT cap. serv. Intensity 27.8 31.7 20.9 Non-ICT cap. serv. Intensity 40.5 62.5 1.8 Multifactor productivity 8.9 -24.5 67.5 Source: CSLS Calculations based on the Canadian Productivity Accounts from Statistics Canada, CANSIM Table 383-0021. Labour Productivity Growth by Province, 1997-2007 Average Annual Rate of Growth 9 Capital Productivity Growth by Province, 1997-2007 Average Annual Rate of Growth 5 4.2 4 3 2 1 0.4 0.3 0.2 0 -0.5 -1 -0.5 -0.6 -0.6 -1.0 -2 -1.9 -3 -3.4 -4 Nfld. Que. N.S. Ont. B.C. Source: CSLS calculations based on unpublished Statistics Canada data. 10 Man. Canada Sask. N.B. P.E.I. Alta. Multifactor Productivity Growth by Province, 1997-2007 Average Annual Rate of Growth 5 4.1 4 3 2 1.1 1 0.9 0.8 0.6 0.5 0.4 0.4 0.1 0 -0.2 -1 -1.6 -2 Nfld. N.S. Que. Ont. Source: CSLS calculations based on unpublished Statistics Canada data. 11 Man. B.C. Canada N.B. Sask. P.E.I. Alta. Labour Productivity Growth by Industry in Canada, 1997-2007 Average Annual Rate of Growth 12 Capital Productivity Growth by Industry in Canada, 1997-2007 Average Annual Rate of Growth Agriculture, forestry, fishing and hunting 2.0 Manufacturing 1.6 Construction 1.4 Information and Cultural Industries 0.5 Utilities 0.0 Wholesale Trade -0.2 Accommodation and Food Services -0.4 Market Sector -0.6 Other Services -0.8 FIRE* -0.9 Retail Trade -1.0 Transportation and Warehousing -1.9 ASWMRS** -2.8 Arts, Entertainment and Recreation -4.5 Mining and Oil and Gas Extraction -5.7 Professional, Scientific and Technical Services -6.7 -8 -7 -6 -5 Source: CSLS calculations based on unpublished Statistics Canada data. * FIRE: Finance, Insurance, Real Estate and Renting and Leasing **ASWMRS: Administrative and Support, Waste Management and Remediation Services 13 -4 -3 -2 -1 0 1 2 3 Multifactor Productivity Growth by Industry in Canada, 1997-2007 Average Annual Rate of Growth Agriculture, forestry, fishing and hunting 2.5 Wholesale Trade 2.2 Retail Trade 2.1 Manufacturing 1.8 Construction 1.6 Information and Cultural Industries 1.5 Other Services 1.2 Accommodation and Food Services 0.6 Market Sector 0.4 FIRE* 0.0 Utilities -0.3 ASWMRS** -0.4 Transportation and Warehousing -0.5 Professional, Scientific and Technical Services -0.7 Arts, Entertainment and Recreation -2.0 Mining and Oil and Gas Extraction -4.8 -6 -5 Source: CSLS calculations based on unpublished Statistics Canada data. * FIRE: Finance, Insurance, Real Estate and Renting and Leasing **ASWMRS: Administrative and Support, Waste Management and Remediation Services 14 -4 -3 -2 -1 0 1 2 3 A Comparison of Sectoral Contribution in 1973-2000 and 2000-2007 period Divided into Within-Sector and Reallocation Effects 15 Investment Weaknesses Low share of machinery and equipment investment in GDP Low share of ICT investment in GDP Long-term decline in public investment as a share of GDP Policy Reponses Introduction of the HST in Ontario and British Columbia to reduce the marginal effective tax rte (METR) on investment Reduction in the statutory federal corporate tax rate Special incentives for ICT investment Increased infrastructure spending 16 Business Investment per Worker Canada as a per cent of the US (Average 1985 – 2005) 17 ICT Investment per Employed Person – 2002 18 The Canada -United States ICT Investment Gap by Indicator (Canada/US) 19 The Canada-US ICT Gap, Canada as a proportion of the United States, 2008 20 Innovation Weaknesses Very weak technical progress, as implied by the poor performance of total factor productivity growth Low business sector R&D intensity Weak linkages between university research and business innovation Policy Responses Generous tax incentives for business R&D Increased government support for higher education R&D Exhortation for better university-business technological partnerships 21 Business R&D Intensity – Business Expenditure on R&D as a Percentage of GDP 22 Trend Components of R&D Intensity in Canada 23 Government Funding of Business R&D Per cent of GDP 24 Human Capital Strengths Highest proportion of the population with a post-second education among OECD countries High PISA scores for high school students World class research universities Weaknesses Relatively low proportion of the population with graduate degrees Low completion rate for apprenticeship programs Underutilization of the human capital of recent immigrants Low levels of human capital of Aboriginal Canadians Poor literacy skills for a significant proportion of the workforce Policy Responses Better recognition of foreign credentials Greater emphasis on high school completion with an increase in the age of compulsory schooling to 18 in Ontario and New Brunswick 25 Macro-economic Framework Policies Stable inflation through inflation targeting Low debt/GDP and deficit/GDP ratios by international standards Improved fiscal position in the medium term due to recovery and spending cuts 26 Micro-economic Framework Policies Market-oriented approach to framework policies as evidenced by 27 privatization of Crown corporations, deregulation of certain sectors (e.g., telecommunications) and apparent easing of foreign ownership restrictions Canada already one of the most market-oriented economies in the world Still some interprovincial barriers to trade (e.g. provincial procurement policies) and labour mobility (recognition of professional credentials) Still foreign ownership rules in certain sectors Marketing boards with controls on domestic production and imports are the most important barrier to international trade Index of Barriers to Entrepreneurship - 2003 28 Market Regulation, Canada, 1975 and 2003 29 Policy Priorities for Improved Productivity Growth in Canada Greater assistance for technology transfer and adoption of best practice 30 techniques by small and medium-sized firms Rebalancing of government assistance to business R&D from tax incentives to direct support, and to technology transfer programs Gradual winding down of marketing boards with production quotas through buy-outs Greater emphasis on graduate education Objective of virtually universal high school completion by moving the compulsory schooling age to 18 Increased emphasis on upgrading the skills of Aboriginal Canadians More effective policies to improve the utilization of the human capital of immigrants