Since the mid-1990s there has been a surge in capital investment in the U.S that has outpaced investment in new machinery and equipment here. And it did not decline in the 1990s as it did in Canada, and started to grow earlier than ours. That might explain the stronger surge in U.S. productivity over the past decade, although it does not necessarily rule out high taxes as a culprit, especially if the higher burden here depressed investment. The study does not address the issue of taxation. But investment in new machinery and equipment here has surged suggesting there might be some catch-up down the road.
Many economists say that is now happening.
Over almost 40 years since the 1960s, Canada has continued to move in step with the United States. Within Canada, however, the findings are not reassuring. In 1973 the labour productivity of foreign controlled plants was 57 per cent higher than in their domestically controlled counterparts, even after taking into account that Canadian owned firms tend to be smaller and in less productive sectors of the economy.