User Guide for Statistics Canada's Annual Multifactor Productivity Program

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by John R. Baldwin, Wulong Gu and Beiling Yan

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The Canadian Productivity Accounts (CPA) of Statistics Canada maintain two multifactor productivity (MFP) programs.

  • The Major Sector Multifactor Productivity Program develops the indexes of MFP for the total business sector and major industry groups in the business sector.
  • The Industry Multifactor Productivity Program or the Industry KLEMS Productivity Program develops the industry productivity database that includes MFP indexes, output, capital (K), labour (L), energy (E), materials (M) and services (S) inputs for the individual industries of the business sector at various levels of industry aggregation. 

This paper describes the methodologies and data sources that are used to construct the major sector MFP indexes and the industry productivity database (or the KLEMS database). More specifically, this paper is meant to

  • provide a background of the major sector MFP program and the industry KLEMS productivity program;
  • present the methodology for measuring MFP;
  • describe the data sources and data available from the MFP programs;
  • present a quality rating of the industry KLEMS productivity data; and
  • describe the research agenda related to the MFP program.

In addition to the MFP measures, Statistics Canada's CPA produces the measure of labour productivity or real gross domestic product (GDP) per hour. A change in labour productivity reflects the change in output that cannot be accounted for by the change in hours worked of all persons. Labour productivity or output per hour differs from MFP in its treatment of capital and labour inputs. Labour productivity — output per hour worked — does not explicitly account for the effects of capital or of changes in labour composition on output growth. As a result, changes in capital intensity (the amount of capital per hour worked) and labour composition (percentage of the growth that comes from higher skilled workers) can influence labour productivity growth.

In contrast, MFP treats capital as an explicit input and, therefore, is net of changes in capital intensity. It measures the extent to which the combined inputs of labour and capital are efficiently used in the production process. Improvements in MFP are associated with technological and organizational changes.

The major-sector MFP program develops the historical series of MFP for the total business sector and major industry groups for the period from 1961 to the most recent year for which annual estimates are possible. The industry KLEMS productivity program develops the historical series of MFP at a more detailed industry level for the period from 1961 to the most recent year of input–output tables (which is published with a three-year lag). The three-year lag in the industry KLEMS productivity program is due to the lag in the publication of the annual input–output tables that provide the data for constructing gross output and intermediate inputs for the industry KLEMS productivity program.

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