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The Canadian Productivity Review
Volume 2006, Number 3
The 2001 to 2004 Revisions of the Canada–U.S. Labour Productivity in the Business Sector
The 2001 to 2004 Revisions of the Canada–U.S. Labour Productivity in the Business Sectorby Mustapha Kaci and Jean-Pierre Maynard1
This paper examines the revision cycle for labour productivity estimates over the period from 2001 to 2004.
The estimates of labour productivity (output per hour worked) that are produced by the Canadian Productivity Accounts are subject to two types of revisions.
The first is a set of short-term revisions in gross domestic product (GDP) that take place over a four-year cycle. This set of revisions follows those that the System of National Accounts (SNA) pursues for its preliminary estimates of GDP.2 A preliminary estimate of GDP that is first released for year t is revised annually over the three subsequent years (t+1 to t+3) as additional data become available to the SNA.
Initially, estimates of GDP at the industry level come from projecting past estimates using a small number of readily measured series (for example, the GDP in Taxi and Limousine Services is projected off the Labour Force Survey [LFS] estimate of employment growth in these industries). The industry estimates are gradually supplemented by far more detailed and accurate data that are obtained from surveys such as the Annual Survey of Manufactures and the Unified Enterprise Survey, and from administrative tax records that become available after a lag of several years. Estimates of GDP that are calculated from final demand are also initially projected from sources that are eventually replaced by more comprehensive information. For example, preliminary data on expenditures that come from retail surveys are eventually updated with the more comprehensive Survey of Household Spending data. Preliminary data on non-residential construction that are projected using employment in construction are updated later with data from an investment survey.
In addition, the labour productivity estimates for year t are revised in year t+1 as new information becomes available to improve the first estimates of employment and hours worked that are made using the LFS. These revisions improve the estimates of holidays and other non-random events.3 Revisions also occur if the employment estimates for the non-commercial sector that are derived from the Public Institutions Division and the Survey of Employment, Payrolls and Hours are revised, since the business sector estimate is obtained residually after removing the non-commercial sector.
The second type of revisions occurs less frequently. The SNA occasionally experiences major revisions due to historical updates, classification changes (for example, the movement from the Standard Industrial Classification to the North American Industry Classification System), or the introduction of conceptual and methodological changes. The latter occur when the SNA updates the method used for measuring certain industries, perhaps because of changes in the international standards to which it adheres (SNA93). For example, in the year 2000, Statistics Canada included software expenditures as investment for the first time.4 When Laspeyres price indices were used to calculate constant dollar GDP, the base year from which weights were derived was updated every five years; this resulted in periodic revisions to growth rates. In addition, changes in analytical techniques, such as shifting to Fisher chained indices, have introduced revisions in the labour productivity estimates. Historical revisions also occur in the employment data when the LFS is occasionally re-benchmarked to Census of Population data.
In this paper, we compare recent revisions in the labour productivity estimates in Canada and the United States. These regular revisions to preliminary estimates extend back four years.
Revisions of labour productivity estimates have recently (June 2005) been made in Canada in order to incorporate the latest available GDP estimates published by the National Economic and Financial Accounts.5,6 These revisions relate to the last four years (2001 to 2004). The revisions back to 1997 are presented in Table 1a, Table 1b and Table 1c, which show a picture of the evolution of the estimates over the last seven revision rounds since 1997. It should be noted that the revisions to the 2002 to 2004 estimates for Canada are not yet completed. This is also the case for the years 2003 and 2004 in the United States. The shaded cells include the estimates during the first four-year revision cycle. Other revisions outside these shaded areas are due to the other sources of revisions outlined above.
For the purposes of this paper, we focus our attention on the effect of revisions for two periods-1981 to 2000 and 2000 to 2004 (see Table 2). The latter period is less than a business cycle in length and covers the years since the end of the previous peak in productivity growth. It also corresponds to the period (except for 2000) when only preliminary estimates of GDP are available. The first period contains estimates that are past the preliminary revision cycle. It essentially covers two business cycles and therefore provides a comparison of differences in long-term trends between Canada and the United States.7 Productivity estimates of short-term changes are generally more volatile than estimates of changes over the long term.
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