What Explains the Canada-US ICT Investment Gap?

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Abstract

This article documents that ICT investment per worker in the Canadian business sector in 2004 was only 45 per cent of the U.S. level, and investigates the factors behind this gap. While no single definitive explanation emerges, the article identifies potential contributors including industrial structure differences, the size distribution of firms, the relative price of labour to ICT investment goods, and possible underestimation of ICT investment in official Canadian statistics. Given that lower ICT capital intensity has been estimated to account for over half the Canada-U.S. labour productivity gap, closing this gap is identified as a priority.

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