Sources of Canadian economic growth
We apply modern ideas-oriented growth accounting, based on the semi-endogenous growth theory of Jones (2002), to compare the sources of Canadian and US economic growth between 1981–2014. This framework allows us to distinguish between transition dynamics and steady state growth as well as quantify their respective contributions. We find that the bulk of the 1.1 percentage points total average Canadian growth rate of output per hour has been due to transitional factors, mainly capital intensity and domestic human capital growth driven by educational attainment. The growth in excess ideas (total ideas growth minus steady state growth) has contributed a small share of 0.06 percentage points. Two features stand out in comparison to the US growth experience over the same period. First, over a full percentage point of the average US growth of 1.64% is due to excess ideas growth. Second, the “constant growth view” that reconciles large sources of transitional growth with relatively stable average growth is not supported in Canada. We estimate a relatively low elasticity of output with respect to world research effort as the reason behind the small share of R&D-oriented sources of Canadian growth.