Public infrastructure, input efficiency and productivity growth: An applied analysis

The objectives of the thesis are: (1) to specify and test for input efficiency effects and to quantify these for the Canadian food processing industry; (2) to determine whether the provision of public infrastructure has affected cost and input choice in the industry and, if significant, to determine the magnitude of this effect; and (3) to measure and decompose total factor productivity growth (TFPG) for this industry---efficiency and public infrastructure effects are part of the decomposition.; The approach involves estimation of an input demand system---using data for 1963 to 1997---that allows for input efficiency and public infrastructure effects. Each demand equation includes the stock of public infrastructure as an explanatory variable so that the effect of public infrastructure on the cost-minimizing level of each input can be both tested for and measured. User costs are estimated as part of the model and these are measured in after-tax terms. Estimated parameters from the demand system are then used to decompose TFPG into its components.; The estimation results show that input efficiency effects in the Canadian food processing industry have been important for all inputs, but largest for capital. Public infrastructure growth has lowered the cost of production in the Canadian food processing industry since the early 1980's. Growth in public infrastructure has led to increased use of capital and decreased use of labour by food processors. Observed TFPG in the Canadian food processing industry has been cyclical and has trended downwards between the 1960's and the 1990's. The efficiency component of observed TFPG has also been cyclical, with an average close to zero between 1964 and 1996. Increased public infrastructure provision has had a positive effect on TFPG.