Abstract:
Increased competition brought about by trade liberalization has raised the stakes
for improving productivity in U.S. and Canadian food processing. A key element of
productivity growth is technological change, which in turn results from R&D investment.
The present study employs an econometric model to assess rates of technological change
and productivity growth in the U.S. and Canadian food processing sectors, allowing for
capital fixity in the short run.
Results suggest that the rate of technological change associated with R&D
expenditure grew quickly in the U.S. and Canada from the early 1960's to early 1970s,
followed by a slowdown during the mid- to late-1970s. The 1973 recession had a
relatively severe negative impact on technological change in the U.S. food sector, while
the early 1980's recession had a greater negative impact in Canada. The annual rate of
technologically induced cost reduction averaged 8.04% in the U.S., and 1.04% in Canada,
between 1983 and 1988. After 1988, however, the rate of technological change declined
in the U.S. while it increased in Canada. In both countries, technological change is the
main source of productivity growth. Rates of return to R&D expenditure are greater in
the Canadian than in the U.S. food processing sector.
