2. Importance of Innovation for Productivity

Principles of Macroeconomics (with Xtra!)

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Unformatted text preview: Importance of Innovation for Productivity Presentation to the Statistcs Canada Economic Conference 2000 by Someshwar Rao, Ash Ahmad, Phaedra Kaptein-Russell Micro-Economic Policy Analysis Branch Industry Canada May, 2000 2 MEPA – APME Key Research Questions What does cross-country data show about the importance of innovation for productivity and living standards? How strongly is inter-industry variation in manufacturing sector productivity correlated with the key indicators of innovation activity in Canada and the United States? What are the major determinants of innovation? How does Canada compare with other countries in terms of the key drivers of innovation? Conceptual Framework 4 MEPA – APME High productivity is key to a high quality of life Productivity Living Standards and Quality of Life Environment Income Distribution and Social Cohesion 5 MEPA – APME Innovation is key to high productivity... Productivity Innovation Human Capital Physical Capital Business Environment 6 MEPA – APME ...but it has many facets Fundamental Innovation Organizational Innovation Innovation Applied Innovation Marketing Innovation 7 MEPA – APME R&D and human capital are crucial drivers of fundamental innovation... Business Environment Knowledge Infrastructure Market Framework Policies Fundamental Innovation Human Capital Research & Development 8 MEPA – APME ...while applied innovation is also driven by investment in M&E and global links Business Environment Market Framework Policies Global Links Machinery & Equipment Research & Development Human Capital Applied Innovation Innovation and Productivity: International Evidence 10 MEPA – APME High productivity leads to a high standard of living Wages and Productivity, 1993, International Evidence * In manufacturing Source: International Yearbook of Industrial Statistics, 1998 Log Scales, Thousand $U.S. 2 20 200 Labour productivity* 0.8 8 80 Wages* Japan U.S. Germany France Italy U.K. India Bulgaria Indonesia Egypt Pakistan Correlation Coefficient: 0.90 11 MEPA – APME Real GDP Per Employed Person* and Patents Per Capita Granted in the U.S. for OECD Countries, 1995 * OECD average is a weighted average based on 1996 PPPs. Source: Industry Canada compilations based on data from OECD and U.S. Patent and Trademark Office. 1 2 3 4 5 6 Log (U.S. Patents Granted)/ 1,000,000 Inhabitants 3.5 4 4.5 5 Log (Real GDP Per Employed Person % of OECD average*) Spain U.S. Switzlnd. Japan Sweden New Zealand Hungary Czech Rep. Correlation Coefficient: 0.63 Fundamental innovation and productivity go hand-in-hand... Luxembourg 12 MEPA – APME ...as does fundamental innovation and living standards * In US$ based on prices and PPPs in 1990 ** Excluding Italy and the U.K. for whom the data on patents in force are not available Source: Industry Canada compilations based on data from U.N....
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2. Importance of Innovation for Productivity - Importance...

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