Infrastructure investment and Canadian manufacturing productivity

This paper examines the relationship between Canadian public infrastructure and private output using a Constant Elasticity and Substitution-Translog (CES-TL) cost model to describe the interaction of the public and private sectors.

We find public capital a substitute for private capital within the Canadian manufacturing sector. Additionally, the services of public capital enhance the productivity of private capital. Canadian manufacturing costs are characterized by economies of scale, indicating that less than optimal plant sizes dominated Canadian manufacturing sector during the study period. Advances in disembodied technical progress are also indicated.     

Link between innovation and productivity in Canadian manufacturing industries

Empirical studies commonly use research and development (R&D) to measure innovation and often find, especially in Canada, no strong link between productivity and innovation. In this article, we model innovation as an unobservable latent variable that underlies four indicators: R&D, patents, technology adoption, and skills. We find that these indicators are reasonably good measures of innovation for aggregate manufacturing. However, except for skills, the reliability of the indicators for innovation differs among individual industries. Our innovation indexes, based on the latent variable model, show that most manufacturing industries became more innovative over the 1980–1997 period. The pace of innovation in the electrical and electronic products industry accelerated during the 1990s. In addition, we show that the new measure of innovation has a positive and statistically significant impact on productivity. It takes from 1 to 3 years, depending on the industry, for innovation to generate an impact on productivity.     

Demographics and recent productivity performance: insights from cross‐country comparisons

Abstract.  Over the last few decades, countries have experienced quite different patterns of productivity growth. In this paper, we emphasize the role of country level demographics in explaining these differences. In particular, looking over the period 1960–2002, we show that cross‐country data support the notion that, starting in the late 1970s, countries went through a period of technological transition that lasted at least until the mid‐1990s for the fastest adjusting countries and is still proceeding for the slower adjusting countries. The main claim of the paper is that the country‐level rate of labour growth was a key factor driving the speed of adjustment to the new technological paradigm, implying that much of the cross‐country difference in economic performance over recent decades can be explained by demographic differences across countries as opposed to the many other factors emphasized in the literature. JEL classification: O33, O41     

Canadian manufacturers' relative productivity performance, 1907–1990

In this paper I calculate TFP ratios for a sample of Canadian manufacturers relative to their American counterparts on an annual basis throughout most of the twentieth century. The data used to calculate these ratios are drawn from both industry-level and firm-level statistical sources. I find that, in contrast to the relative labour productivity evidence in the literature, when TFP is used as the measuring stick, there is virtually no evidence of consistent and substantial relative technical inefficiency on behalf of the Canadian manufacturers represented in my sample. JEL Classification: D24, N60
Dans ce mémoire, l'auteur calcule les ratios de la productivité totale des facteurs de production (PTF) des manufacturiers canadiens par rapport à celle de leurs collègues américains sur une base annuelle pour la plus grande partie du vingtième siècle. Les données utilisées sont tirées des sources statistiques tant au niveau de l'industrie que de l'entreprise. On montre que, contrairement à ce que suggère la littérature spécialisée à propos de la productivité relative du travail, quand la PTF est utilisée comme étalon de mesure, on ne trouve vraiment pas vraiment de résultats qui suggéreraient une inefficacité technique relative substantielle et persistante des manufacturiers canadiens de l'échantillon.     

Exchange rate fluctuations and labour market adjustments in Canadian manufacturing industries

We estimate the link between exchange rate fluctuations and the labour input of Canadian manufacturing industries. The analysis is based on a dynamic model of labour demand and the econometric strategy employs a panel two‐step approach for cointegrating regressions. Our data are drawn from a panel of 20 manufacturing industries from the KLEMS database and cover a long sample period that includes all cycles of appreciation and depreciation of the Canadian dollar over the last 50 years. Our results indicate that exchange rate fluctuations have significant long‐term effects on the labour input of Canada's manufacturing industries, especially for trade‐oriented industries, but that these long‐term impacts materialize very gradually following shocks.     

Advanced technology,innovation, wages and productivity in the Canadian manufacturing sector

In this article, we used a two-step estimation procedure, where in the first stage, the number of advanced manufacturing technologies used in the firm was estimated using a negative binomial regression, and the expenditure on process and product innovation was estimated using a type II Tobit procedure. In the second stage, we used the predicted values from the first stage in wage and labour productivity equations. The data were from the 2009 Survey of Innovation and Business Strategy which was linked to the General Index of Financial Information (2004–2009) and the Longitudinal Employment Analysis Program (2004–2009). The implications for policy are that we should not expect large aggregate effects of innovation on productivity and employment. We should expect wage increases and productivity increases, with process innovation. We should also expect moderate wage increases with product innovation, and contrary to process innovation, the effect on productivity of product innovation was negative.     

Trade, market size, and industrial structure: revisiting the home‐market effect

Abstract.  This paper shows that the issues in the recent discussion over the 'home‐market effects' are more complicated than previously thought. It is shown that, in general, market size matters for industrial structure even when both the homogeneous and the differentiated goods face transport costs. The home‐market effect for production structure can arise, disappear, or even reverse in sign. The analysis shall change a common perception about de‐industrialization of (small) economies and may also have important implications for the empirical research strategies in this area. JEL classification: F12, L1     

Introducing Time‐to‐Educate in a Job‐Search Model

Transition patterns from school to work differ considerably across OECD countries. Some countries exhibit high youth unemployment rates, which can be considered an indicator of the difficulty facing young people trying to integrate into the labour market. At the same time, education is a time‐consuming process, and enrolment and dropout decisions depend on expected duration of studies as well as on job prospects with and without completed degrees. One way to model entry into the labour market is by means of job‐search models, where the job arrival hazard is a key parameter in capturing the ease or difficulty in finding a job. Standard models of job search and education assume that skills can be upgraded instantaneously (and mostly in the form of on‐the‐job training) at a fixed cost. This paper models education as a time‐consuming process, a concept which we call time‐to‐educate, during which an individual faces the trade‐off between continuing education and taking up a job.     

Tariff reduction and employment in Canadian manufacturing

Abstract.  This paper uses firm-level tax data to investigate whether the link between tariff changes and manufacturing employment differed across firms with various productivity and leverage characteristics over the period 1988–94. The results suggest that the effect of domestic tariff reductions on employment was typically small, but that losses were significantly larger for less productive firms. For instance, firms with average productivity in 1988 responded to domestic tariff changes by cutting employment by 11.3% over the period 1988–94, while lower-productivity firms typically shed 20.8% of their workforce over the same period. This paper also indicates that firms with unhealthy balance sheets – those with relatively too much equity or too much leverage – downsized more in the face of declining domestic tariffs, suggesting that financial constraints became more binding when tariff cuts were implemented. These results suggest that firms with high productivity and better financial health were better positioned to face the challenge of trade liberalization.     

The Canadian productivity stagnation, 2002–2014

Total factor productivity (TFP) growth in Canada between 2002 and 2014 has been only 0.16% per year. This figure is substantially smaller than that of the United States, or that of Canada in the past. We perform multiple counterfactual exercises to show that this small TFP growth cannot be accounted for by several compositional effects or mismeasurements of factors of production. We identify two key sectors (mostly Mining and to a lesser extent Manufacturing) that drive all of the TFP growth difference with the United States. Despite the lack of TFP growth, Canada has experienced sustained income growth due to a prolonged period of appreciation of the terms of trade (while US terms of trade have deteriorated), making real income in the two countries grow at similar rates.     

Smuggling, non‐fundamental uncertainty, and parallel market exchange rate volatility

Abstract.  We explore a model where smuggling and a parallel currency market arise, owing to government restrictions that prevent agents from legally holding foreign exchange. Despite such restrictions, agents are able to diversify their savings, holding both domestic and parallel foreign cash, basing their portfolio allocation on current and prospective parallel exchange rates. We attribute movements in parallel rates to non‐fundamental uncertainty. The model generates equilibria with both positive and negative parallel premia and correlations between illegal trade and the premium. The model has the novel implication that currency speculation drives smuggling, affecting real activities in all sectors of the economy. JEL classification: F31     

Search frictions and labor market participation

Cross-country differences in labor market participation are often larger than differences in unemployment rates. The same holds true across demographic groups within a given economy. We argue that the interaction between labor force participation decisions and labor market frictions can help us understand these patterns. This interaction highlights dynamic aspects of the participation decision, in contrast to standard textbook treatments that emphasize static costs and benefits of participation. We extend the standard labor market search problem to allow for a third state—non-participation—and assumes that stochastic participation costs precipitate flows into and out of non-participation. We fully characterize the worker's decision problem and use numerical simulations to demonstrate how participation patterns vary with individual characteristics and with labor market conditions.     

Product market competition and productivity shocks

I investigate the interaction effects of competition and productivity shocks on stocks’ earnings and returns. I find that the sensitivities of earnings and returns to productivity shocks are negatively associated with competition intensity. I also find that the excess returns of productivity shocks-sorted portfolios are lower when competition intensity is high, even after controlling for known return predictors. Overall, the empirical evidence shows firms are less exposed to productivity shocks when competition is high. As such, this study provides a possible mechanism through which the structure of product markets affects stock returns.     

Services liberalization and productivity of manufacturing firms

Employing a unique database of Ukrainian firms in 2001–07, we use the external push for liberalization in the services sector as a source of exogenous variation to identify the effect of services liberalization on total factor productivity (TFP) of manufacturing firms. The results indicate that a standard deviation increase in services liberalization within a firm is associated with a 9.2 percent increase in TFP. The effect is stronger for firms with high productivity, bringing about a reallocation of resources within an industry. Industry‐level results show that the effect of reallocation on industry productivity is almost as strong as the within‐firm effect. The dynamic interaction of services liberalization and TFP through the investment channel reinforces the effect. The effect is robust to different estimation methods and to different sub‐samples of the data. In particular, it is more pronounced for domestic and small firms.     

Partial Communication in a Voluntary‐Contribution‐Mechanism Experiment

This paper presents results of a voluntary‐contribution‐mechanism experiment with partial communication. It was found that the trend of mean investments depended on whether a communication network was connected and on how fast all subjects could share information. When each subject could communicate with two other subjects and the network was connected, the mean investment increased from 33 percent to 58 percent of the optimal investment. On the other hand, when each subject could communicate with only one other subject and the network was not connected, the mean investment decreased from 34 percent to 19 percent of the optimal investment.     

Informality and productivity in the labor market in Peru

This article analyzes the evolution of informal employment in Peru from 1986 to 2001.

Contrary to what one would expect, the informality rates increased steadily during the 1990s despite the introduction of flexible contracting mechanisms, a healthy macroeconomic recovery, and tighter tax codes and regulation. We explore different factors that may explain this upward trend including the role of labor legislation and labor allocation between/within sectors of economic activity. Finally, we illustrate the negative correlation between productivity and informality by evaluating the impacts of the Youth Training PROJOVEN Program that offers vocational training to disadvantaged young individuals. We find significant training impacts on the probability of formal employment for both males and females.     

Growth of factor productivity in Turkish manufacturing industries

This paper presents estimates of rates of total factor productivity (TFP) growth for two-digit manufacturing industries in Turkey over the period 1963 to 1976. Estimates are presented separately for the public and private enterprises in each industry. It is shown that periods of slower productivity growth coincided with periods of a more stringent traderegime. It is also shown that, despite the fact that the rate of growth of TFP was about the same in the public and private sectors, absolute levels of inputs in the public sector enterprises are much higher than in their private sector counterparts.     

Adjustment costs and factor demands in Canadian manufacturing industries

This paper examines whether there is a relationship between the commodity terms of trade (the price of primary commodities relative to the price of manufactures) and the net barter terms of trade of 42 Sub-Saharan African countries. For most countries, there is little evidence of a stable, long-run relationship between the two terms of trade series. Accordingly, the practice in the literature of proxying for movements in any given country's terms of trade by using an aggregate index of relative commodity prices is inappropriate, and is likely to engender misleading policy conclusions.     

A Simple Characterization of the Second‐best Two‐part and Block‐rate Tariffs Theory and Applications

The general necessary optimality conditions for second‐best discrete multipart tariffs are rather complex. In this paper, we derive a simplified characterization of these conditions for two‐part tariffs and for block‐rate tariffs for given thresholds of these tariffs. The simplified necessary optimality conditions are equivalent to the necessary conditions for a Ramsey‐optimum for goods with continuously variable individually demanded quantities. We demonstrate that this characterization of second‐best multipart tariffs can be helpful, when applying the usual regulatory mechanisms to these tariffs. In particular, we consider Vogelsang–Finsinger (1979) regulation as well as a particular form of price‐cap regulation which is related to the Laspeyres index of prices.     

Heterogeneous sports participation and labour market outcomes in England

Based on a unique composite dataset measuring heterogeneous sports participation, labour market outcomes and local facilities provision, this article examines for the first time the association between different types of sports participation and employment and earnings in England. Clear associations between labour market outcomes and sports participation are established through matching estimation while controlling for some important confounding factors. The results, which are supplemented and supported by a formal sensitivity analysis, suggest a link between different types of sports participation to initial access to employment and then higher income opportunities with ageing. However, these vary between the genders and across sports. Specifically, the results suggest that team sports contribute most to employability, but that this varies by age across genders and that outdoor activities contribute most towards higher incomes.