Canada is highly integrated with the U.S. economy. This north-south link, coupled with its east-west dimension, also renders Canadian production dependent on communication infrastructure. We investigate the influence of research and development (R&D) spillovers from U.S. manufacturing and Canadian communication infrastructure on Canadian manufacturing. Canadian production becomes relatively more R&D-intensive from communication spillovers. However, manufacturers substitute knowledge from U.S. spillovers for domestic R&D. U.S. spillovers cause production to become more plant- and equipment-intensive. Spillovers also enhance productivity. Communication infrastructure accounted for 8.5% of the growth, with the major source emanating from U.S. spillovers. They contributed 76% of the gains.

Jeffrey I. Bernstein, Exports, Margins and Productivity Growth: With an Application to the Canadian Softwood Lumber Industry, The Review of Economics and Statistics, Vol. 76, No. 2 (May, 1994), pp. 291-301

The authors estimate a model of production and investment based on the theory of dynamic duality. They are particularly interested in the effects of R&D spillovers and in calculating the social and private rates of return. Cost-reducing, factor-biasing and capital-adjustment spillover effects are estimated for four industries. The existence of R&D spillovers implies that the social and private rates of return to R&D capital differ. The authors estimate that the social return exceeds the private return in each industry. Moreover, there is significant variation across industries in the differential between the social and private rates of return.

This paper presents estimates of the productivity and factor bias effects of interindustry R&D spillovers for five high-tech industries. Each industry is distinguished as a separate spillover source. The industries are each affected by R&D spillovers and are themselves spillover sources. Thus a spillover network between the industries is estimated. Private and social rates of return to R&D capital are calculated. The private rates of return are generally greater than the returns to physical capital. In addition, the social rates of return are greater than the private rates. The results show that there are significant differences between industries as to their importance as sources of R&D spillovers.

This paper establishes that new inputs increase technical efficiency levels for U.S. manufacturing. Over the period 1950–1998, intermediate inputs exhibited higher rates of efficiency growth than labor and capital. Efficiency-adjusted productivity growth annually averaged 0.4 percentage points above measured growth. The gap between efficiency-adjusted and measured productivity growth arises from aggregating inputs using observed, and not efficiency-adjusted, cost share weights in the calculation of measured growth. Specifically, the decline in efficiency-adjusted material cost shares, compared to the measured shares, coupled with the comparatively high material input growth rate, was the main source of the productivity gap.