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Unbalanced Industry Demand and Supply Shifts: Implications for Economic Growth

Unbalanced Industry Demand and Supply Shifts: Implications for Economic Growth in Canada and the United States. Anik Dufour, Jianmin Tang, and Weimin Wang. Presentation to The 2008 World Congress on National Accounts and Economic Performance Measures for Nations May 12–17, 2008. MEPA/APME.

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Unbalanced Industry Demand and Supply Shifts: Implications for Economic Growth

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  1. Unbalanced Industry Demand and Supply Shifts: Implications for Economic Growth in Canada and the United States Anik Dufour, Jianmin Tang, and Weimin Wang Presentation to The 2008 World Congress on National Accounts and Economic Performance Measures for Nations May 12–17, 2008 MEPA/APME MEPA/APME

  2. Introduction: motivation Real GDP is non-additive or A proxy or

  3. Real industry output Industry output prices Introduction: how does an industry influence real aggregate GDP in the chained-Fisher index?

  4. Introduction: what drive a change in industry output and price? Supply shift, and Demand shift

  5. Introduction: supply shifts and demand shifts are often unbalanced across industries. Positive supply shifts: more for the manufacturing less for some services industries Positive demand shifts: More for services Less for goods

  6. Introduction: production resources will be reallocated under unbalanced industry demand and supply shifts

  7. What are the industry contributions to aggregate GDP growth, or aggregate labour productivity growth? Objective

  8. Real GDP

  9. Real GDP growth from year z to year t

  10. Industry contributions to real GDP growth 1st term: pure quantity effect 2nd term: pure price effect 3rd term:the interaction of the first two effects.

  11. Consistent with real GDP in the chained-Fisher index Additive for any long period Invariant to base-year Major desirable properties

  12. Canada: industry contribution to aggregate GDP growth 1981-2000

  13. US: industry contribution to aggregate GDP growth 1981-2000

  14. Aggregate labour productivity

  15. Aggregate labour productivity growth from year z to year t

  16. Industry contributions to aggregate labour productivity growth 1st term: the pure productivity effect 2nd term: the relative size effect 3rd term:the interaction of the first two effects.

  17. Consistent with real GDP in the chained-Fisher index Additive for any long period Invariant to base-year Major desirable properties

  18. Relative size by industry in Canada and the U.S.

  19. Canada: industry contribution to aggregate labour productivity growth, 1981-2000

  20. U.S.: industry contribution to aggregate labour productivity growth, 1981-2000

  21. This paper provides a decomposition technique to study industry contribution to aggregate output and labour productivity growth. The technique is consistent with real GDP in the chained-Fisher index and has several desirable properties. The framework distinguishes the industry contribution from changes in the industry output and changes in industry’s output price. It shows that over the period 1981-2000, the service sector was the major contributor to both real GDP growth and aggregate labour productivity growth. The estimate of the contribution for the service sector is much higher than estimates using traditional methods that focus only on the quantity effect. By ignoring the price effect, traditional methods underestimate the contributions of service industries with rising real output prices to real GDP growth and aggregate labour productivity growth. Conclusions

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