The sources of total factor productivity growth: Evidence from Canadian data

Abstract

A dynamic general equilibrium model is constructed and used to identify sources of total factor productivity growth in Canada and to quantify their importance. The model also provides procedures for constructing measures of technological progress. We find that periods of low productivity growth correspond to periods of high growth in investment-specific technology (IST) or high rates of technology embodiment. For example, the growth rate of IST was relatively high between 1974 and 1996. The higher growth rate of IST during this period should have increased the rate of productivity growth by an estimated 0.29 percentage points, ceteris paribus. Yet, productivity growth slowed. Why?