Economics Professor Erwin Diewert

Are Statistics Canada’s (StatCan) numbers on Canadian productivity growth accurate?‎ Vancouver School of Economics Professor Erwin Diewert says simply, “No”.

In a recent paper, New Estimates of Real Income and Multifactor Productivity Growth for the Canadian Business Sector, 1961-2011, he wrote with Emily Yu (an economist at the Canadian Department of Foreign Affairs and International Trade) on Canadian TFP (or multifactor productivity growth, MFP) growth, they obtained much higher numbers than the official StatCan numbers. Diewert and Yu say that official StatCan estimates (their industry Internal Rates of Return or IRRs), which feed into their user costs, are way too high and too volatile to be useful.

Diewert and Yu ask if perhaps our measurement of productivity is at fault. Their findings are another example of the kind of turn-conventional-thinking-on-its-head research for which the Faculty of Vancouver School of Economics are renowned.

This most recent study by Diewert and Yu provoked Maclean’s Magazine to run a feature series on the questions raised, with a statement from the series writer that, “It is a persuasive and possibly revolutionary idea and it’s the reason why [we] decided to dedicate a week-long special report to the issue of productivity.”

The Maclean’s article continues:

“Statistics Canada, which compiles such numbers, however, seems uninterested in investigating the hypothesis of a measurement error. The agency—known among economists for its high-quality and extensive research, generous data sharing and, among reporters, for its quick and helpful feedback to media inquiries—appeared uncharacteristically defensive on this issue.

“When [Diewert and Yu] published research last December showing that using an alternative methodology yields much better productivity growth rates, StatsCan was quick to reject it, even though one of the authors, Erwin Diewert, a professor at the University of British Columbia’s Vancouver School of Economics, is widely regarded as one of the world’s finest brains in the field.” Read full Maclean’s article…