Welcome to the Productivity Partnership's winter newsletter!
In this newsletter:


Since the start of the Partnership, we have funded over 30 research projects with more coming on a regular basis.

The following are some of the projects that have been approved for funding since our previous newsletter.
Title: Interrelated Factor Demand of Heterogeneous Capital Goods and Labour
Researchers: Alexander Amundsen (McGill University) and Markus Poschke (McGill University)

This project will explore the technological frictions that firms face when adjusting their capital and labour. These frictions, known as adjustment costs, limit the ability of firms to optimally set their input allocations. Using an administrative firm level dataset from Statistics Canada, a three-factor structural model is developed to estimate the adjustment costs of buildings, machinery & equipment, and labour. The project highlights the degree to which these adjustment costs differ across inputs and explores interrelations between them. These interrelations are important because they provide an additional channel through which fiscal and monetary policy can affect the factor demand of inputs.

Datasets: T2-Longitudinal Employment Analysis Program (T2-LEAP)

Title: Design Investment, Design Innovations and Firm Performance 
Researchers: Shu Wang (McMaster University) and Sandra Schillo (University of Ottawa)

Datasets: The importance of product design has been brought to public attention in the past decade. A few empirical innovation studies have examined the impact of design on firm performance. Firms’ design emphasis and resources, design investment, design innovativeness and design newness are found to positively impact firms’ performance. In spite of these contributions, empirical studies of product design and design innovativeness are still sparse. Understanding of how design innovativeness is cultivated within a firm and motivated by environmental factors and how marketing activities facilitate design innovativeness is yet to be advanced. This study is expected to fill this gap.

Datasets:  Survey of Innovation and Business Strategies (SIBS)

Title: The Effect of Universal Child Care on Employee Productivity and Firm Performance
Researchers: Elena Simintzi (University of North Carolina, Chapel Hill), Sheng-Jun Xu (University of Alberta), and Ting Xu (University of Virginia)

We aim to understand how providing access to affordable childcare can affect economic productivity. We know from a wide body of academic literature that child-rearing responsibilities impose a severe penalty on the careers of working women, and governments have occasionally attempted to address this by providing public subsidies for universal childcare access. We study one prominent example of such a subsidy program, in which Quebec introduced a generous universal subsidy in 1997 that limited childcare costs to five dollars per day. The specific implementation of the program allows us to compare working mothers with children who are narrowly eligible versus narrowly ineligible for the new program. By comparing otherwise-similar individuals with differing levels of access to childcare, we can estimate how access to childcare affects the future productivity and career trajectories of the individuals affected. We also study whether this subsidy improved the productivity of firms by comparing Quebec to Canadian provinces that did not introduce any new subsidy programs. Our research will provide future policymakers with a better understanding of the costs and benefits of childcare subsidy programs.

Datasets: Longitudinal Worker File (LWF) and T2-Longitudinal Employment Analysis Program (T2-LEAP)

Title: Do Firms in Canada Exploit All of their Wage-Setting Power?
Researchers: Suresh Naidu (Columbia University), Leonard Goff (Columbia University), and Matthew Mazewski (Columbia University)

Beginning with the work of the economist Joan Robinson in the 1930’s, the word “monopsony" has been used in economics to refer to any market situation in which the buyer of a good possesses market power (i.e. some ability to choose the price at which they buy), regardless of whether or not there is actually only a single such buyer. Although monopsony power may be an important phenomenon in many different contexts, a growing body of research has focused on identifying and quantifying its extent in labor markets. Unfortunately, the existing empirical literature on this topic has thus far not meaningfully addressed one especially significant question, namely: to what extent do firms exploit all of the potential monopsony power available to them in setting the wages of their workers? The goal of our proposed study is to directly explore this question by using the CEEDD to simultaneously estimate both wage markdowns, or reduction of wages below what would be earned in a perfectly competitive market where firms have no wage-setting power, as well as the “full'' markdowns that would be predicted by standard models of an imperfectly competitive labor market, given the labor supply elasticity facing particular firms (a measure of how likely workers are to quit in response to wage cuts). Our hope is that these estimates will allow us to measure not only the average extent to which firms utilize their available wage-setting power, but also to explore heterogeneity in the same and to identify relevant correlates of being a “high-utilization" or “low-utilization" (of monopsony power) firm. We are particularly interested in studying whether firms with governance structures that allow for employee participation, including collective bargaining, are less aggressive monopsonists, as predicted by recent theoretical work on the topic.

Datasets: Canadian Employer-Employee Dynamics Database (CEEDD) and National Accounts Longitudinal Microdata File (NALMF)

Title:  The Effect of Environmental Regulation with Strategic Firms: Evidence from Canadian Manufacturing
Researchers: Jarone Gittens (Queen's University)

This project studies the impact of environmental regulation on the manufacturing sector. It examines how firms' strategic responses affect economic outcomes, which in turn affect the cost of regulation and the ability to achieve policy goals. First, this project quantifies some of these effects by estimating the impact of Canadian air quality regulation on plant level outcomes including: productivity, output, input use, emissions, likelihood-of-exit, investment, and capital stock. Second, this project studies the link between regulation induced shifts in firms' production/investment location choices, and productivity. These location choices can increase the cost of regulation by affecting productivity via changes in agglomeration economies, which suggests that changes to the regulation could be more efficient at reducing pollution.

Datasets: Annual Survey of Manufacturing (ASM) and National Accounts Longitudinal Microdata File (NALMF)

Unsure what is possible using CDER datasets?

Explore the presentation 'Exploring Research Opportunities through the Productivity Partnership' to find out what is possible.

We've created an interactive online presentation on how to utilize the Productivity Partnership to access data at the Statistics Canada Centre for Data Development and Economic Research (CDER). The presentation outlines each data set’s highlights and explains the application processes for both the Partnership and CDER. This project is targeted primarily toward prospective applicants and website viewers, but is designed to be informative and accessible to all audiences. 


Have an idea for a project on productivity?

 Visit our website to learn more about how to apply for project funding.


Productivity, Innovation and Entrepreneurship: The Role of Immigration and Workforce Diversity
November 25 – 26, 2019 | Memorial University, St. John's NL 
The Partnership sponsored a two-day conference at Memorial University that brought together researchers, policy-makers and other stakeholders to discuss important issues surrounding immigrant's productivity, innovation and entrepreneurship, and integration in Newfoundland and Canada.

The conference consisted of 6 sessions. The first session included two keynote speeches by Jennifer Hunt (James Cullen Chair in Economics, Rutgers University) and Arthur Sweetman (Ontario Research Chair in Health Human Resources, McMaster University). Jennifer Hunt's address discussed the various definitions of productivity and which types of immigration policies foster productivity. She also compared Canadian immigration programs to those of other countries. Arthur Sweetman's address covered a number of topics including the relationship between immigrant retention and the business cycle, and the relationship between physical capital investment and productivity growth. 

The remaining 5 sessions and Productivity Partnership affiliated speakers were:

Session 2: Immigration, Productivity, and Entrepreneurship: Canadian Evidence
  • Wulong Gu (Statistics Canada)
  • Beryl Li (Statistics Canada)
Session 3: Immigrant Integration and Labour Market Performance in Atlantic Canada
  • Michael Haan (Western University)
Session 4: Global Migration Policy and Outcomes
  • Derek Messacar (Statistics Canada)
Session 5: Moderated Roundtable Discussion on Research, Policy, and Practice

Session 6: Immigrant Settlement and Integration in NL

The conference program is available here. 
Beryl Li (Statistics Canada) presenting, "Multinationals, gender and immigrant composition of the workforce, and firm performance" at the Productivity, Innovation and Entrepreneurship: The Role of Immigration and Workforce Diversity Conference 


Our website has a number of working papers, presentations, journal articles, and commentary.

Applying Data Synthesis for Longitudinal Business Data Across Three Countries
M. Jahangir Alam (Truman State University), Benoit Dostie (HEC Montréal), Jörg Drechsler (Institute for Employment Research) and Lars Vilhuber (Cornell University)

Data on businesses collected by statistical agencies are challenging to protect. Many businesses have unique characteristics, and distributions of employment, sales, and profits are highly skewed. Attackers wishing to conduct identification attacks often have access to much more information than for any in- dividual. As a consequence, most disclosure avoidance mechanisms fail to strike an acceptable balance between usefulness and confidentiality protection. Detailed aggregate statistics by geography or detailed industry classes are rare, public-use microdata on businesses are virtually inexistant, and access to con- fidential microdata can be burdensome. Synthetic microdata have been proposed as a secure mechanism to publish microdata, as part of a broader discussion of how to provide broader access to such datasets to researchers.

In this article, we document an experiment to create analytically valid synthetic data, using the exact same model and methods previously employed for the United States, for data from two different countries: Canada (Longitudinal Employment Analysis Program (LEAP)) and Germany (Establishment History Panel (BHP)). We assess utility and protection, and provide an assessment of the feasibility of extending such an approach in a cost-effective way to other data.

The paper is also forthcoming in the journal, Statistics in Transition New Series. Congratulations to all the authors! 

Employer Policies and the Immigrant-Native Earnings Gap
Benoit Dostie (HEC Montréal), Jiang Li (Statistics Canada),
David Card (UC Berkeley and NBER) and Daniel Parent (HEC Montréal)

We use longitudinal data from the income tax system to study the impacts of firms’ employ- ment and wage-setting policies on the level and change in immigrant-native wage differences in Canada. We focus on immigrants who arrived in the early 2000s, distinguishing between those with and without a college degree from two broad groups of countries – the U.S., the U.K. and Northern Europe, and the rest of the world. Consistent with a growing literature based on the two-way fixed effects model of Abowd, Kramarz, and Margolis (1999), we find that firm-specific wage premiums explain a significant share of earnings inequality in Canada and contribute to the average earnings gap between immigrants and natives. In the decade after receiving permanent status, earnings of immigrants rise relative to those of natives. Compositional effects due to selective outmigration and changing participation play no role in this gain. About one-sixth is attributable to movements up the job ladder to employers that offer higher pay premiums for all groups, with particularly large gains for immigrants from the “rest of the world” countries.



Below is a selection of Partnership news.
Journal Articles

Congratulations to Partnership Associate Bryan Hong on his recent publication as supported by the Partnership in the Strategic Management Journal:
Outsiders: External hiring and decision authority allocation within organizations
Bryan Hong, (Productivity Partnership Collaborator, NYU Stern School of Business)

This study examines the relationship between external hiring and the allocation of decision authority within organizations, and how they interact to affect organizational change and innovation. We test our hypotheses using panel data for a nationally representative sample of businesses in Canada. We find that the practice of external hiring of managers and high‐skilled nonmanagerial employees predicts greater decision authority allocated to each respective level of the hierarchy. Reallocation of authority is positively moderated by the strategic priority of (a) workplace reorganization for managerial hiring, and (b) new product development for nonmanagerial hiring. We also find evidence of related associations with workplace reorganization and product innovation. The findings suggest that decision authority allocation is essential to effectively utilize externally acquired human capital.

Congratulations to Partnership co-investigator Benoit Dostie for his recent publications supported by the Partnership:

Who benefits from firm-sponsored training?
Benoit Dostie (HEC Montréal)

Workers participating in firm-sponsored training receive higher wages as a result. But given that firms pay the majority of costs for training, shouldn’t they also benefit? Empirical evidence shows that this is in fact the case. Firm-sponsored training leads to higher productivity levels and increased innovation, both of which benefit the firm. Training can also be complementary to, and enhance, other types of firm investment, particularly in physical capital, such as information and communication technology (ICT), and in organizational capital, such as the implementation of high-performance workplace practices.

Immigrants and Workplace Training: Evidence from Canadian Linked Employer-Employee Data
Benoit Dostie (HEC Montréal) and Mohsen Javdani (University of British Columbia - Okanagan Campus)

Job training is one of the most important aspects of skill formation and human capital accumulation. In this study, we use longitudinal Canadian linked employer–employee data to examine whether white/visible minority immigrants and Canadian‐born emplooyees experience different opportunities in two well‐defined measures of firm‐sponsored training: on‐the‐job training and classroom training. While we find no differences in on‐the‐job training between different groups, our results suggest that visible minority immigrants are significantly less likely to receive classroom training, and receive fewer and shorter classroom training courses, an experience that is not shared by white immigrants. For male visible minority immigrants, these gaps are entirely driven by their differential sorting into workplaces with fewer training opportunities. For their female counterparts, however, they are mainly driven by differences that emerge within workplaces. We find no evidence that years spent in Canada or education level can appreciably reduce these gaps. Accounting for potential differences in career paths and hierarchical level also fails to explain these differences. We find, however, that these gaps are only experienced by visible minority immigrants who work in the for‐profit sector, with those in the nonprofit sector experiencing positive or no gaps in training. Finally, we show that other poor labor market outcomes of visible minority immigrants, including their wages and promotion opportunities, stem in part from these training gaps.

Congratulations to Stephanie Houle, Partnership student now graduate, for her recent publication in Economics Bulletin:

The Curious Incident of Luxury Imports during the Top-Income Surge
Stephanie Houle (Bank of Canada), Pau Pujolas (Partnership co-investigator, McMaster University) and Mike Veall (Partnership Director, McMaster University)

Atkinson, Piketty and Saez (2011) find a post-1979 surge in taxfiler top income shares in "English speaking countries" (surge countries) but not in "continental European countries and Japan" (no-surge countries). Working at a similarly high level of abstraction, we find the puzzle that import-to-GDP ratios and import-to-total-import ratios for luxuries (pearls, precious stones, diamonds, works of art, jewellery, furs and coins) do not increase post-1979 in surge countries relative to no-surge countries. Explanations could include potential flaws in the taxfiler or import data, or that top income individuals do not have a particularly high marginal propensity to import these luxury goods. Overall, we believe that this is a fragment of evidence that there may not have been a large post-1979 increase in top-end domestic consumption inequality in surge countries compared to no-surge countries.


We also congratulate Pau Pujolas, Partnership co-investigator on his publication in the Canadian Journal of Economics:

The Canadian Productivity Stagnation
Juan Carlos Conesa (Stony Brook University) and Pau Pujolas (Partnership co-investigator, McMaster University) 

Total factor productivity (TFP) growth in Canada between 2002 and 2014 has been only 0.16% per year. This figure is substantially smaller than that of the United States, or that of Canada in the past. We perform multiple counterfactual exercises to show that this small TFP growth cannot be accounted for by several compositional effects or mismeasurements of factors of production. We identify two key sectors (mostly Mining and to a lesser extent Manufacturing) that drive all of the TFP growth difference with the United States. Despite the lack of TFP growth, Canada has experienced sustained income growth due to a prolonged period of appreciation of the terms of trade (while US terms of trade have deteriorated), making real income in the two countries grow at similar rates.


We congratulate our co-investigator Laura Grigolon on her new position at the University of Mannheim. Laura's previous position was in the Department of Economics at McMaster.

Stephanie Houle, previously at Statistics Canada, has moved to become Senior Economist in the Canadian Economic Analysis Department at the Bank of Canada. Congratulations Stephanie!

We also congratulate our co-investigator Byron Spencer on his retirement as Research Program Director of the Canadian Research Data Centre Network (after his earlier retirement as Professor of Economics at McMaster). Byron continues as a member of the Partnership steering committee.


Mike Veall (McMaster University), Partnership Director, and other economists offerered insight in Maclean's on what Canada can do next to improve the economy amid the pandemic. The piece can be found here: "How to save the economy."

Tony Fang (Memorial University), Partnership co-investigator, discussed how newcomers help improve the economy in NL. The article can be found here: "How multiculturalism helps Newfoundland and Labrador's economy."

Greig Mordue (McMaster University), Partnership co-investigator, wrote a piece in the Hamilton Spectator which discussed how Canadian manufacturers have stepped up during the pandemic crisis. The piece can be found here: "Canadian manufacturers have responded to the pandemic crisis, and need support."

Mike Veall discussed income inequality in Canada in Policy Options. The piece can be found here: "Income inequality has risen in Canada, but not in a straight line."

Don Drummond (Queen's University), Partnership co-investigator, was quoted in an article that discussed how gaps in COVID-19 data have limited Canada's response to the pandemic. The article can be found here: "How Canada’s crucial data gaps are hindering the coronavirus pandemic response."
Audra Bowlus (Western University), Partnership co-investigator, was quoted in a piece that discussed the Canada Emergency Response Benefit (CERB). The piece can be found here: Stories of CERB: "Canadians share how they're using the emergency benefit."

Michael Haan (Western University), Partnership co-investigator, was quoted on the potential demographic impact of the pandemic. The article can be found here: "Stress eating for two: we could be seeing the first signs of a pandemic baby boom."

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