Investment and Productivity in Canadian and U.S. Food Manufacturing
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A restricted cost function model of Canadian and U.S. food manufacturing shows that productivity growth rates in Canada have remained well below those in the United States for the past decade and a half At mean factor prices, output, and capital quantities, processing costs would be 22% lower in the U.S. than in Canada. Technical change in both countries has been labor-saving and material-using, although slightly more so in the U.S. than in Canada. The labor-saving bias of technical improvements puts Canada at a disadvantage to its southern neighbor, since food manufacturing wages in Canada tend to be lower and material prices higher than in the United States. Enhancing its competitiveness will require that Canada reduce raw food and packaging costs or invest more in research and development.
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