Advanced technology, innovation, wages and productivity in the Canadian manufacturing sector

ABSTRACT

In this article, we used a two-step estimation procedure, where in the first stage, the number of advanced manufacturing technologies used in the firm was estimated using a negative binomial regression, and the expenditure on process and product innovation was estimated using a type II Tobit procedure. In the second stage, we used the predicted values from the first stage in wage and labour productivity equations. The data were from the 2009 Survey of Innovation and Business Strategy which was linked to the General Index of Financial Information (2004–2009) and the Longitudinal Employment Analysis Program (2004–2009). The implications for policy are that we should not expect large aggregate effects of innovation on productivity and employment. We should expect wage increases and productivity increases, with process innovation. We should also expect moderate wage increases with product innovation, and contrary to process innovation, the effect on productivity of product innovation was negative.

KEYWORDS:

• Product innovation
• process innovation
• advanced manufacturing technology
• productivity
• wages

JEL CLASSIFICATION:

• O31
• O32

ORCID

Brian P. Cozzarin http://orcid.org/0000-0002-4280-7633

Notes

¹ The survey was conducted in January‒April 2010 by Statistics Canada under the auspices of the 1985 Statistics Act which legally requires firms to answer the questionnaire. The sample was 6233 firms with at least 20 employees; response rate was 70%. For more information, see http://www.ic.gc.ca/eic/site/eas-aes.nsf/eng/h_ra02092.html.

² For more information, see http://www.cra-arc.gc.ca/tx/bsnss/tpcs/crprtns/rtrn/wht/gifi-ogrf/menu-eng.html.

³ For more information, see http://www23.statcan.gc.ca/imdb/p2SV.pl?Function=getSurvey&SDDS=8013.

⁴ Due to space limitations, the NAICS4 concordance with the taxonomy is omitted.

Additional information

Funding

This work was supported in part by Social Sciences and Humanities Research Council under Grant 435-2014-2061 and by Industry Canada under Research Contract 5025591.