Technical change and productivity: With emphasis on machinery and equipment, advanced manufacturing technologies, replacement investments, and capital deepening in Canadian manufacturing industries

This paper examines how factors such as the age of capital stock, replacement investments, R&D, and the degree of capital sophistication may have affected Canadian manufacturing productivity, by altering the technology embodied in machinery and equipment. As a group, industries with greater adoption levels of advanced manufacturing technologies (AMT) had higher labour productivity growth rate and level estimates than those with low er adoption levels. Canadian establishments significantly lagged American establishments (except for those with 500+ employees) in AMT adoption and R&D which has likely contributed to the Canada-U.S. productivity gap.;A cross-pooled econometric analysis found that vintage effects did exist with respect to labour productivity. The age coefficient was significant and negative but was lower for the 1983--94 period than for 1972--94. The sample's rate of capital embodied technical change was estimated at 20% per year for 1972--94 vs 14.2% for 1983--94. The replacement investment variable coefficients were insignificant for labour productivity regressions but were significant and positive for total factor productivity (TFP) with a 1% increase leading to a 0.3% increase in TFP growth rates. Overall, the findings indicated that, the quality and nature of investments and their application is very important, and that deficiencies in these areas have therefore hurt Canadian manufacturing productivity.