Multifactor productivity disparity between Canadian and US manufacturing firms

This paper measures multifactor productivity (MFP) gap between Canadian and U.S. manufacturing firms and investigates its underlying factors. We demonstrate that estimation methodology is crucial, given that the Canadian sample is much smaller than the U.S, one. Our results indicate that the MFP performance of Canadian manufacturing firms relative to that of U.S. manufacturing firms deteriorated from the 1985-88 period to the 1989-92 period and partly recovered in the 1993-95 period. However, the MFP gap still stood at about 18 per cent in the 1993-95 period. We show that industrial structure was not responsible for the MFP gap.