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This paper compares the relative importance of small and large firms in the business sectors of Canada and the United States from 2002 to 2008 using estimates of the contribution of small and large firms to the gross domestic product (GDP) of each country. It then makes use of estimates of labour input for comparison purposes. In this paper, small firms are defined as those with fewer than 500 employees and large firms as those with 500 or more employees.
The relative importance of small firms in terms of GDP and hours worked is found to be larger in Canada—and substantially greater when labour input, rather than GDP, is used. In 2008, small firms in Canada generated 53.4% of business-sector GDP compared to 46.1% in the United States. The relative share of hours worked in the business sector was 70.8% in Canada, compared to 55.6% in the United States. This implies that the relative productivity of small firms vis-à-vis large firms is lower in Canada than in the United States.
The study also found that, from 2002 to 2008, both business-sector GDP and hours worked grew faster in Canada relative to the United States for both small and large firms—but that the differences were higher for large firms. From 2002 to 2008, growth of business-sector GDP was 4.9% for small firms and 7.5% for large firms in Canada while it was 4.3% for small firms and 5.5% for large firms in the United States. Furthermore, growth in business-sector hours worked was 1.0% for Canadian small firms and 2.8% for Canadian large firms from 2002 to 2008 compared to 0.4% for U.S. small firms and 1.2% for U.S. large firms.
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