Capital Intensity in Canada and the United States, 1987 to 2003

Canadian Productivity Review Research Paper No. 18

55 Pages Posted: 19 Nov 2009

See all articles by John R. Baldwin

John R. Baldwin

Statistics Canada - Microeconomic Analysis Division

Wulong Gu

Government of Canada - Micro-Economic Analysis Division

Anthony Fisher

Government of Canada - Department of Finance Canada

Frank Lee

Finance Canada

Benoit Robidoux

Department of Finance Canada

Date Written: July 10, 2008

Abstract

Official data from statistical agencies are not always ideal for cross-country comparisons because of differences in data sources and methodology. Analysts who engage in cross-country comparisons need to carefully choose among alternatives and sometimes adapt data especially for their purposes. This paper develops comparable capital stock estimates to examine the relative capital intensity of Canada and the United States.

To do so, the paper applies common depreciation rates to Canadian and U.S. assets to come up with comparable capital stock estimates by assets and by industry between the two countries. Based on common depreciation rates, it finds that capital intensity is higher in the Canadian business sector than in the U.S. business sector. This is the net result of quite different ratios at the individual asset level. Canada has as higher intensity of engineering infrastructure assets per dollar of gross domestic product produced. Canada has a lower intensity of information and communications technology (ICT) machinery and equipment (M&E). Non-ICT M&E and building assets intensities are more alike in the two countries.

However, these results do not control for the fact that different asset-specific capital intensities between Canada and the United States may be the result of a different industrial structure. When both assets and industry structure are taken into account, the overall picture changes somewhat. Canada’s business sector continues to have a higher intensity of engineering infrastructure and about the same intensity of building assets; however, it has a deficit in M&E that goes beyond ICT assets.

Keywords: productivity, investment, Canada–United States differences

JEL Classification: D24, J24, O47, E22

Suggested Citation

Baldwin, John R. and Gu, Wulong and Fisher, Anthony and Lee, Frank and Robidoux, Benoit, Capital Intensity in Canada and the United States, 1987 to 2003 (July 10, 2008). Canadian Productivity Review Research Paper No. 18, Available at SSRN: https://ssrn.com/abstract=1509488 or http://dx.doi.org/10.2139/ssrn.1509488

John R. Baldwin

Statistics Canada - Microeconomic Analysis Division ( email )

24 Floor - R.H.Coats Building
Tunney's Pasture
Ottawa, Ontaria K1A 0T6
Canada
613-951-8588 (Phone)
613-951-5403 (Fax)

Wulong Gu (Contact Author)

Government of Canada - Micro-Economic Analysis Division ( email )

24 Floor - R.H.Coats Building
Tunney's Pasture
Ottawa, Ontaria K1A 0T6
Canada

Anthony Fisher

Government of Canada - Department of Finance Canada ( email )

Esplanade Laurier, 18th floor, East Tower
Ottawa, Ontario K1A 0G5
Canada

Frank Lee

Finance Canada ( email )

Esplanade Laurier, 18th floor, East Tower
Ottawa, Ontario K1A 0G5
Canada
613-992-5053 (Phone)

Benoit Robidoux

Department of Finance Canada ( email )

Esplanade Laurier, 18th floor, East Tower
Ottawa, Ontario
Canada K1A 0G5
613 992-6930 (Phone)
613 992-5773 (Fax)

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