Total Factor Productivity Growth in the Sawmill and Wood Preservation Industry in the United States and Canada: A Comparative Study

Abstract

Abstract By using the Törnqvist-Theil index approach, we analyze trends in total factor productivity (TFP) growth in the United States and Canadian sawmill and wood preservation industries (NAICS 3211) between 1958 and 2003. The results indicate that the TFP grew at an average annual compound rate of 1.11% due to higher growth in aggregate outputs by 1.42% and a smaller growth in aggregate inputs by 0.31% in the United States. In Canada, TFP grew at a smaller average annual compound rate of 0.61% as a result of growth in aggregate outputs and inputs by 3.57% and 2.94%, respectively. Although productivity growth for production worker input was similar in both countries, large gaps in productivity growth existed for nonproduction workers, material, capital, and energy inputs. The gap in TFP growth between the two countries appears to have widened since 1987, primarily due to the differences in capital stock growth. Volatility in lumber prices after 1991 might have also played a role, as the Canadian industry could not adequately respond to changing market situations in the face of uncertainty and trade barriers on softwood lumber exports to the United States.