ALBERT

Notes: This review article initially summarizes some of the highlights of the volume Why Growth Rates Differ, including the use of income shares as weights for the various factor inputs and some of the major factual conclusions drawn from the inter-country comparisons. Some of the main factors in differences in income levels and differences in growth rates are then reviewed.In appraising the contribution of the volume, the monumental task is emphasized. This study illustrates the adaptability of the approach which Denison developed initially in The Sources of Economic Growth. The volume meets many of the questions and criticisms raised of his earlier study, and should encourage a shift of the discussion from methodology towards the substance of the empirical results.The volume introduces some shifts in emphasis on the importance of different factors in growth. The role of demand variations and the contribution of capital is considered, but the evidence in the volume gives less emphasis on the importance of these factors than earlier work by others in both the United States and Europe. The volume gives some emphasis to shifts out of agriculture and the self-employed in the high postwar growth in many individual European countries. It considers the effects of reductions in trade barriers, and follows the view of most economists in playing this down. Advances in knowledge are also considered.Those who are interested in questions of economic growth, past and future, and economic policy in this area will find much in this volume for study and reflection.

Notes: This paper provides estimates of the effects of inflation in Canada on the reported rate of return in manufacturing from 1966 to 1982. It provides estimates for several different concepts of rate of return (both for all assets, whether financed by equity or debt, and for the narrower equity to the owners) and for both a narrow and wide range of financial assets. Comparisons are made with similar studies for the United Kingdom. Such studies show that reported profits are overstated and total assets are undervalued during and after periods of inflation with traditional accounting concepts relative to an economic concept designed to maintain the firm as an ongoing entity.The paper also discusses a number of factors that have contributed to the marked drop in the rate of return in Canadian manufacturing when both income and assets are valued at replacement costs. Some of these factors are also present in the other industrialized countries, such as increased raw materials prices, and a slower increase in productivity. Other factors have been relatively more important in Canada than in other countries, such as the historically higher level of production costs in Canada than in the United States and Japan, the two most important countries in Canadian trade. This is important during a period of tariff reductions when international competition in manufactured products is widespread.Although corporate profits and the adjusted profits rates of return were depressed by the severity of the 1981-82 recession, some of the key factors depressing the rates of return are longer-term in nature. A continued persistence of these factors during the balance of the 1980s could contribute to restraint in business investment in manufacturing when total returns on a replacement cost basis are so much below the corporate long-term cost of capital.This paper applies the concepts of inflation accounting to total Canadian manufacturing for the period from 1966 to 1982. Measures of rates of return for individual years are provided, both on the basis of total assets and on the basis of the net assets attributable to the owners. There are four sections in the paper after an introduction. Section 2 is a brief conceptual statement and outlines the methods. Section 3 makes comparisons with similar studies for the United Kingdom and summarizes the results of this and other studies. Section 4 discusses the environmental factors for Canadian manufacturing that appear to contribute to the lower rates of return in recent years. Section 5 discusses the implications of the results for future business decisions.

Notes: This paper is a part of a larger study of economic growth in Canada, following the methods developed by Edward Denison in his book The Sources of Economic Growth in the United States and the publication Why Growth Rates Differ. The new material in this paper relates to Canada and the Canadian/U.S. comparison, while the material on Northwest Europe is drawn from the Brookings study.The present paper sets out the results to date on the differences in real output per employed person between Canada and the United States for one year, 1960. At this stage in our research the results indicate that the level of real output per employed person in Canada was about 20 per cent lower than in the United States in that year. On the basis of historical output data, it would appear that this margin of difference in Canadian/U.S. product levels has persisted throughout the present century.The central part of this paper examines the significance of differences in factor inputs in Canada and the United States and their contribution to the difference in income. The level of inputs per employed person in Canada accounts for only about 2 percentage points of the income difference between Canada and the United States. These results indicate that the overwhelming part of the difference in output per employed person between the two countries reflects the differences in output in relation to total factor inputs, rather than the magnitude of other factor inputs used in combination with labour.This result is consistent with earlier studies by Denison and others which have indicated the crucial importance of output in relation to total factor inputs, both in output growth over time and intercountry comparisons of output level.The body of the paper can give only brief attention to the numerous conceptual and statistical questions that arise in such a wide-ranging study, and the authors do not pretend to have tackled, let alone resolved, all of the wide range of problems related to this study. Nor do they claim any high degree of precision for the results, especially in the light of the statistical limitations of the basic data.