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UBC Theses and Dissertations

Canada 1980 methodology, trends, and forecast McCombs, Arnold Martin 1967

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CANADA  METHODOLOGY,  1980  TRENDS,  AND FORECAST  by ARNOLD B.A.  Sc.,  MARTIN  University of British Columbia,  A THESIS SUBMITTED OF  REQUIREMENTS  MASTERS  McCOMBS  IN P A R T I A L  FULFILLMENT  FOR T H E DEGREE OF  OF BUSINESS  In the  1960.  ADMINISTRATION  Department of  Commerce  We accept this thesis as conforming to the required standard.  UNIVERSITY  O F BRITISH 1967.  COLUMBIA  In p r e s e n t i n g for  thesis  an a d v a n c e d d e g r e e a t  that  the  study. thesis  Library  for  the  make  University  it  that  fulfilment  freely  of  permission  representatives,  of  this  thesis  for  permission.  of  The U n i v e r s i t y o f B r i t i s h V a n c o u v e r 8, Canada  Columbia  for  the  It  financial  requirements  Columbia,  I  reference  and  for extensive  or  by h i s  of  British  available  p u r p o s e s may be g r a n t e d  my w r i t t e n  Department  agree  in p a r t i a l  scholarly  publication  without  shall  I further  Department or  this  copying of  agree  this  by t h e Head o f my  is understood gain  shall  that not  be  copying allowed  II A B S T R A C T  The basic  trends  followed studies iples  basic objective  was to  to  1965  developed  and  examine  to  the  would rors  seem in  the  to  to  be  resources,  on  the  real  as  of  and  course  of  to  the  of  The  previous  the  procedure  forecasting  apply  these  Canadian  those  of  long  these  growth, an  already  quantity capital,  and and  as  the  the  advanced  quality  of  effort  princeconomy  tend  affect  to  presently  basis to  for  make  be  preecon-  growth  ignored  in  variables,  economic tend  to  it  is  growth.  It  cause  er-  forecasts.  expansion industrial  the  be  economic  f a c t o r s that  economic  defined  an  unquantifiable  factors  unknown  to  complete  affecting  sociology  with  range  a In  variables  many  appears  form  nation.  non-economic  these  in  a  theory  many  Together  r e s u l t s of  produce,  dependent  therefore  growth  many  Economic acity  and  such  how  future  some  economy.  principles and  economic  manageable,  terms.  known  theory  identify  1980.  economic  development  i s to  Canadian  economic  possible  explain  theory  the  thesis  methodological  the  and  this  shape  comprehensive  quantitative not  to  determine  No  omic  to  estimate  between  dicting  tending  of  nation's  technological level  of  a  nation's  economy, labour in  the  is  capheavily  force, society.  natural  Ill These al,  basic  determinants  tempered  and consumption trends o r  Although economic  omic  growth  forecaster very  many  growth,  appreciably  articles  the p r e s e n t  have  and development  appears  most c o m m o n  sitate a population f o r e c a s t and then with assumptions total output  c a n be  Sophisticated  the t r e n d s thesis w a s population.  per-man  p e c t e d to m a k e  up the  e x p e c t e d in the l a b o u r  force  economic  depend  appears  to  estimate  productivity,  force  age and s e x specific  mainly  by  but  econ-  an  neces-  is  made  estimate  made.  based on broad estimates for  25,800,000  to b e  forecasts.  output  a labour  w i t h i n e a c h of t h e s e c o h o r t s .  Due  theory  various  m e t h o d to d e t e r m i n e  regarding  not a p p e a r  the long r a n g e  economic  to m a k e  from which  does  a s p e c t s of  no c o m p l e t e t h e o r y of  to e x i s t ,  insights f r o m  1980. labour force  Of  The  force. are  at a b o u t  The  a large  and then  trends  birth rate 3.8  used  per  per  10,000,000  significant  i n f l u x of y o u n g  div-  analyze in  this  thousand  in C a n a d a ,  percent  about two  t e n d to  methodology  various  this f i g u r e ,  forecasts  cohorts  to a n e x p e c t e d h i g h  p o p u l a t i o n i s a n t i c i p a t e d to i n c r e a s e about  As  population and labour  i d e t h e p o p u l a t i o n into  economy.  s t a t e of k n o w l e d g e  much on his o w n r e s o u r c e s  institution-  been written on v a r i o u s  stage.  gain some  b y the s o c i o l o g i c a l ,  f a c t o r s w i t h i n the  past the t h e o r i z i n g  may  The  for  are  the  year  to  are  ex-  trends people and  a  iv greater  participation  In  this  government sectors.  per-man  and  the in  mercial  the  1965  With division  of  and  the  the  stable  stability,  but  on  terns,  it w o u l d  is  declining per  force  for  the  output  trend appear  The  capital  to  the  for  gross  the  projections. difficult  patterns.  to  in  agriculture,  a  the  sector,  increase 4.6  total  and  per-man  in  an  percent  com-  of  per  labour in-  the  in output  estimate  was  the  year  and  exports.  national  product.  categorical  From any  the  made  to  found  tended  to  of t h i s  were  spending  changes  in  that  be  Because  spending  the  expendi-  It w a s  historical  drastic  as  government  sectors  justify  force,  increase  in  broad  broad  work  an  in  accumulation,  these  the  economy.  an  imports  non-agricultural  increase  approximate  Canadian  between  are  force  an  real  agriculture,  examined.  productivity  estimated,  between  be  in  administration  and  to  trends  expected  but  into  commercial  labour  man,  public  estimated  1980  to  force.  separated  the  sector  sector.  estimates  simple  spending  a  of  in output  and  in r e l a t i o n  mainly  basic  trends  expenditures,  the  future  each  labour  output  of  analysis  total output  consumer  division  rather  in  government  sectors  between  the  and  non-agricultural  combined  tures,  administration,  productivity  both  labour  was  the  significant  in the  total output  output  productivity,  in  crease  the  enabled  constant  force  women  public  This  The  rather  thesis,  and  productivity,  of  the  based pat-  TABLE  QF  CONTENTS  Page No I.  INTRODUCTION  1  II.  ECONOMIC  5  A. B. C.  III.  IV.  Introduction Economic T h e o r y Economic Growth  5 5 10  1. 2. 3. 4. 5.  10 12 15 17 27  Definitions and Concepts T h e o r i e s of Economic Growth Purpose and Measurement Determinants and S o u r c e s of Economic Growth Structural Change  POPULATION  30  A. B. C. D. E. F.  30 32 35 40 44 50  Introduction Methodology Birth Rate Death Rate Immigration Future Estimates  LABOUR A. B. C. D. E.  V.  THEORY  FORCE  Introduction Methodology Women in the Labour F o r c e Men in the L a b o u r F o r c e Conclusions and Comments  OUTPUT A . Methodology e . Division of Output C . Agriculture 1. 2. 3. 4.  General Employment Output in Agriculture Productivity in Agriculture  56 56 57 60 64 65 69 69 74 77 77 79 81 83  V.  O U T P U T D. E.  (cont'd)  Page  Government and Public Administration Commercial Non-Agriculture 1 . Introduction 2. Employment 3 . P r o d u c t i v i t y and T o t a l Output  P. VI.  VII.  VIII.  IX.  X. XI.  C o n v e r s i o n of O u t p u t  C A P I T A L  to G r o s s  National P r o d u c t  A C C U M U L A T I O N  85 87 87 88 91 97 104  A.  Introduction  104  B. C. D. E.  Methodology C a p i t a l Output Ratio Past Trends F o r e c a s t to 1 9 8 0  104 111 112 115  G O V E R N M E N T A.  Methodology  B.  Past Trends  C O N S U M E R  E X P E N D I T U R E  119 119  a n d F o r e c a s t to  1980  E X P E N D I T U R E  121 128  A.  Introduction  128  B.  Methodology  129  C.  Trends  133  FOREIGN  and F o r e c a s t T R A D E  136  A.  Introduction  136  B. C. D. E.  Methodology - Imports Methodology - E x p o r t s B a l a n c e of P a y m e n t s T r e n d s in W o r l d T r a d e  136 141 142 143  F.  P r o j e c t i o n to  147  1980  CONSOLIDATION  OF  E X P E N D I T U R E  154  C O N C L U S I O N  157  A P P E N D I C E S BIBLIOGRAPHY  161  No.  LIST  OF  Per  T A B L E S  T A B L E  1  Marriages  T A B L E  2  United  T A B L E  3  Infant M o r t a l i t y  T A B L E  4  Gross  T A B L E  5  Population  T A B L E  6  Sample  T A B L E  7  Distribution  T A B L E  8  D i s t r i b u t i o n of A m e r i c a n L a b o u r w i t h P r o j e c t i o n s to 1 9 8 0  T A B L E  9  E s t i m a t e of W o m e n i n the Force  T A B L E  10  Estimate Force  T A B L E  1 1  Total  T A B L E  12  R a t e s of  T A B L E  13  Estimated  T A B L E  14  Estimated Total  T A B L E  15  Output  T A B L E  16  Historical Output, Employment and Productivity in G o v e r n m e n t a n d P u b l i c A d m i n i s t r a t i o n  T A B L E  17  Estimated Output, Productivity and Employment i n G o v e r n m e n t a n d P u b l i c A d m i n i s t r a t i o n to 1 9 8 0  T A B L E  18  Estimated Labour F o r c e Agricultural Sector  States  Thousand Death  Rates  Per  Immigration  Population  1000 to  Births  Canada  Estimates  Birth of  and  Canadian  of M e n  Estimated  Rates  Labour  Work  Force  Labour  Labour  Employment in  Agriculture  Man-Year  Force  Force  in F a r m  Labour  Force  Canadian  i n the C a n a d i a n  Decline  Per  Immigration  in  Agriculture Output  Agriculture  in C o m m e r c i a l  Non-  Page TABLE  TABLE  19  20  T A B L E 21  TABLE  TABLE  TABLE  TABLE  22  23  24  25  TABLE  26  TABLE  27  TABLE  28  TABLE  29  TABLE  30  T A B L E 31  TABLE  32  TABLE  33  TABLE  34  P a i d - W o r k e r s Labour F o r c e in Commercial Non-Agricultural Sector  90  Estimated H o u r s Worked in Commercial N o n Agricultural Sector  91  Estimated Productivity P e r Man Hour and Total Output in Commercial Non-Agricultural Sector  94  Summary of Components of Employment and Output  96  Comparative Average Annual Percentage Inc r e a s e s in Employment, Total Output and Productivity for the Total Economy  97  Estimated Interest and Dividend Payments on International Account  100  Conversion of G r o s s Domestic Production to G r o s s National Product  102  Estimated Investment  Expenditures  117  Total Government Expenditure Net of InterGovernment T r a n s f e r s Actual Government  No.  122  Expenditure as Compared  with Estimates by C a v e s and Holton Study  123  Estimates of Government  1 27  Expenditure by Function  Consumer Expenditure on Goods and S e r v i c e s  134  Estimates of Consumer Spending on Goods and Services  135  Composition of Imports by Industrial 1954-1963  147  Countries,  Estimates for Imports and Exports to 1980 Distribution of G r o s s National Expenditure by Major Components to 1980  152  154  LIST  OF  ILLUSTRATIONS  Page  FIGURE  1  Population  FIGURE  2  Labour  FIGURE  3  Gross  FIGURE  4  Investment  FIGURE  5  Government  FIGURE  6  Import  Estimates  1965-1980  Force  Estimates  National  Product  Expenditure  Expenditure  and E x p o r t  51  1965-1980  Estimates  Estimates  66  1965-1980  1965-1980  E s t i m a t e s 1 9 6 5 - 1 980  Estimates  No.  1965-1980  101  118  126  153  I.  A.  INTRODUCTION  Purpose  Many tions,  or  financial d e c i s i o n s ,  governments,  be they  made by i n d i v i d u a l s ,  a r e b a s e d on future e x p e c t a t i o n s .  expectations a r e g e n e r a l l y  b a s e d o n f o r e c a s t s of v a r y i n g  sophistication.  this thesis r e v i e w s  Basically,  be u s e d in l o n g - r a n g e  corpora-  Such  future  d e g r e e s of  the methodology that may  e c o n o m i c f o r e c a s t i n g and a p p l i e s s o m e of this  methodology to f o r e c a s t v a r i o u s  a s p e c t s of the C a n a d i a n e c o n o m y  to  1980.  B e c a u s e o n e would expect e c o n o m i c theory ection o r  b a s i s for  economic forecasting,  to offer s o m e  economic theory  dir-  will be briefly  e x a m i n e d in an effort to d e t e r m i n e what a s p e c t s of e c o n o m i c theory may be i n c o r p o r a t e d o r  u s e d in l o n g - r a n g e e c o n o m i c f o r e c a s t i n g .  S u b s e q u e n t to the r e v i e w  of e c o n o m i c t h e o r y ,  r a n g e e c o n o m i c f o r e c a s t i n g methodology, and the l i t e r a t u r e , odoligy  for  of long  f r o m both past e c o n o m i c studies  will be made to determine the c o m m o n l y u s e d m e t h -  forecasting economic variables  p r o d u c t a n d major  a review  s u c h a s the g r o s s  components of the g r o s s  national e x p e n d i t u r e .  national  national product and g r o s s  It w o u l d s e e m that in many l o n g - r a n g e  forecasts,  2. these  major  components  expenditure  would  form  of  gross  the  basis  national for  product  more  and  detailed  gross  long  national  range  fore-  casts.  Following dicated  pertinent  Canada  together  to  be  affecting  make  the  trends with  such  estimates some  of  ing  development  cation  of  together  the in  will  long-range  be  values  of  factors  of  Canadian  of  the  the  or  forecast  major  for  is  of  attempted  appear  appear  not  but to  in-  for  which  variables  which  the  forecast  factors  economic  trends  only  also  be  to to  affect-  economy.  established,  a  examination  economic  T h i s  methodological  trends  form  of  made.  major the  an  procedures  the the  two  with  factors  Canadian  the  are  identifi-  brought  economy  to  1980.  Scope  ES.  In is  a  r e v i e w ,  examination  various  basic  the  an  future  the  Combining  affecting  trends  for  identify the  methodological  almost  primarily  F o r that  the of  any  limited  Canadian  the  Royal  the  case,  sponsored  by  ture  of  of  the  analysis,  r e s o u r c e s  the  Commission  w a s  millions  by  forecast  most on  Canadian  dollars  to  of  the  those  detailed  government the  and  depth  undertaking  and  Canada's  publish  detail  thorough  Economic and  the  the  forecast  the  w o r k .  study  forecast.  Prospects  entailed  multi-volume  of  w a s which  expendiF r o m  this  thorough  study,  the effort  structure  of the C a n a d i a n e c o n o m y r a n g e s down to the e x p r e s s i o n of  a c a s u a l opinion on the  made to f o r e c a s t the future  and  matter.  Although the depth of study for the attempt w a s  size  this thesis is n e c e s s a r i l y  limited,  made to examine what w o u l d a p p e a r to be the main  points of the f a c t o r s tending to affect the development of the C a n a d i a n e c o n o m y and to do so in sufficient depth so the r e s u l t s with a fair  d e g r e e of c o n f i d e n c e .  w a s to identify  basic trends,  B e c a u s e one of the main objectives  however,  the statistical r e l a t i o n s h i p s between the  C.  could be u s e d  no effort w a s  made to  study  variables.  Methods.  As  h a s been i n d i c a t e d , the methods e m p l o y e d in this thesis  for  determining the methodology of long r a n g e e c o n o m i c f o r e c a s t i n g w a s to examine r e c e n t studies that h a v e been done on this topic in relation to the C a n a d i a n e c o n o m y . of available literature  F r o m these s t u d i e s ,  on the t o p i c ,  together  various forms or  with a r e v i e w  types of m e t h o d -  ology w a s e s t a b l i s h e d .  The  methodology w o u l d then indicate the n e c e s s a r y  data to be r e v i e w e d  historical  and the b a s i c t r e n d s to be identified.  In most c a s e s , the f o r e c a s t n e c e s s i t a t e d s o m e f o r m of  trend  extension.  Such  trends w e r e  j u d g m e n t by the a u t h o r sary  adjustments  opinion  based on  o f t e n a d j u s t e d o n the b a s i s of  but s u c h a d j u s t m e n t s  in p r e v i o u s knowledge  were  b a s e d o n the  f o r e c a s t s a n d o n the a u t h o r ' s gained from reading  qualitative neces-  personal  in t h e r e l e v e n t  area.  II.  A.  ECONOMIC  T H E O R Y  Introduction  The and  main  purpose  of t h i s s e c t i o n i s to e x a m i n e  p r i n c i p l e s of e c o n o m i c t h e o r y  projections or growth some  forecasting and  at i t s p r e s e n t  examine  for  concepts  that s e e m s r e l e v a n t to l o n g b r i e f l y the t h e o r y  s t a g e of d e v e l o p m e n t  possible methodology  the  i n a n e f f o r t to  purposeful  long r a n g e  of  range  economic  formulate  growth  project-  ion.  From that s o m e will or  t h i s b r i e f r e v i e w of the c u r r e n t  of t h e m o r e  be o b s e r v e d how one  might  and  important  problems  indications on h o w  minimize their a d v e r s e  of  they  theory,  it i s a l s o  long r a n g e may  hoped  forecasting  affect the  forecast  e f f e c t s o n t h e a c c u r a c y of  such forecasts.  Certainly  after  studying  such economic theories and  these with what actual data is available for suitable  B.  methodology  Economic  of  long t e r m  relating  study and a n a l y s i s ,  forecasting should  emerge.  Theory  Economic  theory,  it w o u l d s e e m ,  has rather  arbitrarily  a  narrowed  its o w n  tions s u c h  a s t h e r a t i o n a l i t y of  assumptions, theories volved  economic  sharply  political s c i e n c e ,  Ror abstract  and  must  have  theoretical mechanics  The  between  lationships  become  run  forecast  Such casual  areas and  such,  come  of  and in-  related areas  economics  essentially  principles.  is often  cause  Any  and  compared  with  conditions".  question  s c i e n c e s and  when  economic  one  studies  behavior  forces and  the  become  casual  re-  uncertain.  that o n e  wrong  to b e  measured  very must  uncertain consider  c o m p l e x i t i e s in mainly when  contemplating  that g i v e s r i s e to t h e u n c e r t a i n t i e s of  f o r e c a s t s go relations  in t e r m s  tends  general  m a n y of the i n t e r e s t i n g  It i s b e c a u s e of t h e s e non-economic  becoming  non-economic  from a few  into  most  without  economics  which  and  fundamental  that e x i s t i n s u c h  other  "frictionless  the s o c i a l  innumerable  area  based on  variables  relationship  or  then,  as  these  consequences.  phenomena  be abstract and  making  assump-  b e e n ' a b l e to b u i l d i t s p r i n c i p l e s  sociology,  proceeding  explains  By  certain simplifying  uncertainties  reasons  deductive  making  delineated  economic  the a b o v e  science which  almost  has  in the c o m p l e x i t i e s a n d  w h i c h i n f a c t do  by  man.  theory  within a rather  fields a s  effect  f i e l d of t h e o r y  because  affecting o u r  we  are  forecast for  aware growth  the  of o n l y and  a  the long-  forecast. some  change.  of  the  7. Possibly the  main  growth  Under or  reason  has  theories  t h e u n c e r t a i n t i e s of t h e s e  been  are  such  why  no  mainly  conditions,  t h e o r i e s of g r o w t h  forces  all inclusive satisfactory theory  developed.  built  non-economic  As  on  indicated,  the p r e m i s e  it c o u l d h a r d l y could properly  most  for  economic  of a f e w  are  economic models  economic  or  concepts.  b e e x p e c t e d that s u c h e x p l a i n a l l a s p e c t s of  models  economic  growth.  It w o u l d  seem  a s w e l l a s the g e n e r a l  a complete theory  would  the b e h a v i o r a l  sciences which  inconclusive.  A s  the  limits set by  those  s u c h effects w h e n  Applied business p a t t e r n of do  life of  economics error  economic not  make  and  are  subjective  which  It a p p e a r s  it p o s s i b l e to p r e d i c t  t h e r e s u l t s of a c t i o n .  They  must  inductive  investigation,  as well as  partures  f r o m t h e p a t t e r n of  are  the  do  economic  indefinite  and  to r e t r a c t forces  in  within  outside or  allow-  theory.  not  the r o l e  conform  that e c o n o m i c  the  events  data s e c u r e d  to a l l o w f o r  rationality.  to  in  principles  c o u r s e of r e a l  be filled in w i t h modified  growth  involved  judgments  to t a k e a c c o u n t of  motives  rationality.  economic  very  that t h e r e  make  try  of  is forced  utilizing e c o n o m i c  must  a n d of  economics  recognize  in the t h e o r y  theory  necessitate becoming  in t h e m s e l v e s  then,  the t h e o r y ,  considered  a n c e s for  alone  a result  economic  "This  various m a y , of  or  by decourse,  8. b e i n t e r p r e t e d to m e a n and  most  notably,  not to b e  to i t .  ing a v e r a g e s  In m o s t c a s e s ,  and aggregates  thinner they  are.  more remote A s  generality.  as  t h e i n t e r p r e t a t i o n of r e c o r d s  and their  movements  can add  sense principles or  apparent  simplicity, any  p r i n c i p l e s i s b o u n d to m a k e and  but r a t h e r  comcover-  much  in most  Recently,  from  brief  s t a t e m e n t of  abstract economic theories  appear  the c o n c r e t e f a c t s of e c o n o m i c l i f e t h a n  sciences,  there  is a need for  the " e c o n o m e t r i c "  forcibly reminding  the i n q u i r e r  omic  direct o r  variable has  thus preventing  economic  apprach  cause and  that a c h a n g e  all d e g r e e s  has developed,  are  in p r a c t i c a l l y a n y  indirect effects on  h i m f r o m totally o v e r  n e c e s s a r i l y a b s t r a c t , the m o r e  modern  with in  econ-  other  mag-  s i m p l i f y i n g c o n c e p t i o n s of  general  economic  life.  p r i n c i p l e s of  econ-  t h e o r e t i c a l p a r t s of e c o n o m i c s  c a n n o t b e t a k e n to b e a c o m p l e t e a n d a d e q u a t e i s m of  innumerable  of  effect.  It w o u l d s e e m t h e n that s i n c e m o s t omics  to  observation  t h e p r i n c i p l e v a l u e of s u c h e l a b o r a t e a n d a b s t r a c t s y s t e m s b e i n g  nitudes,  are  cases.  B e c a u s e of t h e i r general  data,  statistical investigation  sound theory,  c a n be i n f e r r e d f r o m c o m m o n  of p a r t i c u l a r  a p p r o a c h e s to e c o n o m i c  historical r e s e a r c h and  taken a s a substitute for  plimentary  what  that t h e o t h e r  a c c o u n t of the  mechan-  9. Although  e c o n o m i c t h e o r i e s often afford  serviceable  t i o n s to p a r t i a l a s p e c t s of t h e t r u e , e c o n o m i c w o r k i n g s , constantly appear  and  terests emerge.  As  l e d g e of  more  into  more realisms  line with  Possibly theory  phenomena  money  and  more  better  facts present and remains  theories  that m o n e y w a s  new  improved  and have  in-  knowattempted  brought  them  modern  important and  varied  adopted  in a s e n s e ,  economic  Early  classical  an instrument  e c o n o m i s t s to r e c o g n i z e effects on  or  tool.  depression that t h e u s e  the c h a r a c t e r of e f f e c t i v e  of de-  distribution.  and  concrete,  to h a n d l i n g  themselves,  merely  about  d e f l a t i o n a n d of b o o m a n d  b e s t a t e d t h e n that a l t h o u g h  become  become  forced  production  It m a y  and  economists have  m o n e y in the e c o n o m y .  inflation a n d  credit has  mand and on  have  of  however,  into t h e i r  that w i t h  t h e b e s t e x a m p l e of t h i s r e - t h i n k i n g  c o u l d b e t h e r o l e of  have,  seem  problems  facts.  e c o n o m i s t s h e l d the v i e w The  it d o e s  the a c t u a l w o r k i n g s of t h e e c o n o m y ,  to i n c o r p o r a t e  new  c h a l l e n g e attention a s facts c h a n g e a result,  approxima-  t h e i n t e r e s t s of and although  conceptions  t h e f a c t s of e c o n o m i c  economics remains  life a s  a political o r  a "theoretical" discipline.  economics have  those  social science  10. C.  Economic  1 .  Growth  Definitions and  In v e r y simply  Concepts  general  terms,  economic  growth  may  a s " t h e e x p a n s i o n of a n a t i o n ' s c a p a c i t y to p r o d u c e  a n d s e r v i c e s its p e o p l e w a n t " . the e c o n o m y  is relatively open  of w a n t s r e l y  heavily on  In a c o u n t r y  a n d the p e o p l e ' s  imported  goods,  that h a v e  Certainly been  greater  without  much  A  want  Canada's  satisfying p o w e r  a b i l i t y to e x p o r t ,  goods where  income and satisfaction necessi-  in r e t u r n  than t h o s e  for  exported.  economic growth  would  have  slower.  more  s p e c i f i c c o n c e p t of e c o n o m i c g r o w t h  c e s s of e x p a n d i n g  and  productive  actual growth production, important  the  the definition w o u l d  e x p a n s i o n of a n a t i o n ' s c a p a c i t y to p r o d u c e  Although  defined  such as Canada  tate t h e e x t e n s i o n to i n c l u d e t h e a b i l i t y to e x p o r t g o o d s goods  be  improving  and also  t h e d e t e r m i n a n t s of  c a p a c i t y i s the i m p o r t a n t  depends  w o u l d i n d i c a t e the  not o n l y o n  i n v o l v e s the  pro-  productive capacity.  c o n c e p t of e c o n o m i c g r o w t h ,  the c h a n g e s  in the e c o n o m y ' s  potential  but a l s o u p o n t h e e x t e n t to w h i c h that c a p a c i t y i s u t i l i z e d ,  an  p o i n t that w i l l b e d i s c u s s e d i n a l a t e r s e c t i o n .  Economic growth conceptually  c a n b e u s e d to d e s c r i b e t h r e e  quite distinct p h e n o m e n a .  These  are  historically and indicated  11. below:  a)  An  e x p a n s i o n of a c t i v i t y a n d  economy  not a c c o m p a n i e d  structural  b)  A  sharp  by  any  far  in a  pre-industrial  reaching  technological  or  change.  a c c e l e r a t i o n in production  technological and omy  production  accompanied  structural changes  from a relatively undeveloped  by  dramatic  which transform  to at l e a s t a  an  econ-  developing  status.  c> A  s u s t a i n e d e x p a n s i o n of p r o d u c t i o n  industrial economy  by  means  of  l o g i c a l c h a n g e s of a t y p e a l r e a d y  Although any  one  e a c h of t h e a b o v e  economy,  may  in a n a l r e a d y  economic, familiar  advanced  social and  techno-  to i t .  not b e d i s t i n c t l y i d e n t i f i e d  each illustrates an important  a s p e c t of  in  economic  progress.  As  will  technological  be d i s c u s s e d m o r e thoroughly  progress  gress.  It w o u l d  e r a of  innovation  seem  plays a very that,  possibly  in w h i c h t h e y  to t a k e t e c h n o l o g i c a l p r o g r e s s Today,  however,  it s e e m s  important  lived, and  in the next s e c t i o n , role  in e c o n o m i c  b e c a u s e of t h e many  classical  unprecedented economists tended  increasing productivity  generally  pro-  for  a c c e p t e d that m o d e r n  granted.  economic  12. growth  is,  in s u b s t a n c e ,  s y s t e m of p r o d u c t i o n  a n a p p l i c a t i o n of the i n d u s t r i a l s y s t e m o r  based on  i n c r e a s i n g u s e of  modern  a  scientific  knowledge.  2.  theory  " T h e o r i e s of  Economic  Although  mentioned  or  growth.  model  at t h i s  to b r i e f l y  there  i s no  all i n c l u s i v e  e x p l a i n i n g a l l a s p e c t s of some  of  i n s i g h t s o n t h e f a c t o r s to b e  economic  consider  economic  growth,  some  of  however,  these models  it  or  con-  would  theories  point.  Most technological  modern  growth  progress  discoveries are per  are  in the d e t e r m i n a t i o n  advisable  previously,  describing or  B e c a u s e there  sidered seem  as  Growth  the  and  theories acknowledge underlying  necessary  c a p i t a i n c o m e that  it,  a s e r i e s of  conditions for  is combined  that  a high  continuous  new  scientific  r a t e of g r o w t h  w i t h a s u b s t a n t i a l r a t e of  in  population  growth.  Science technology ency  for  i s s e e n a s t h e b a s e of  i s in t u r n  the b a s e of  scientific d i s c o v e r y ,  limited intellectual r e s o u r c e s appear  most  promising  f e w f i e l d s at a n y  given  modern technology  modern  invention,  economic growth. and  available and  at a n y  time,  time.  The  and  innovation,  because only  modern  The  b e c a u s e of a few  the  areas  i s to b e c o n c e n t r a t e d i n o n l y c o n s e q u e n c e of t h i s ,  tend-  a  e s p e c i a l l y in  13. a  more  growth. of o l d e r  advanced There  economy,  i s to g r e a t l y  is a tendency  e f f e c t t h e p a t t e r n of  toward retardation  i n t h e r a t e of  i n d u s t r i e s a s the e c o n o m i c e f f e c t s of t e c h n o l o g i c a l  and- innovation  within them  c o m p e t i t i o n of t h e n e w r a t e of g r o w t h considerable  in a n  slacken and  industries for  economy  shifting in r e l a t i v e  old decline and  the n e w  growth  progress  a s they feel i n c r e a s i n g l y  the  is then  economic  limited r e s o u r c e s .  A  high  necessarily accompanied  importance  among  industries,  i n c r e a s e in r e l a t i v e w e i g h t  the  by  as  the  i n the  nation's  out-  briefly  explore  the  put.  The  above  r o l e of t e c h n o l o g y change  oped"  only or  t e n d to b e economies.  beyond  growth.  The  the b o u n d a r i e s  A  such havior  of  may  d i s c u s s i o n of  seems  be e x p e c t e d , by  pure  natural  to h a v e  developed  the  must  economics and grapple of  labour, but  t h e s t o c k of must  institutional, and  along  economic  confronting  such theories  r e s o u r c e s available, cultural,  structural  chapter.  w i t h the p r o b l e m s  defined  f a c t o r s a s the p o l i t i c a l , patterns.  fuller  theory  e c o n o m i c v a r i a b l e s a s the s u p p l y  the quantity  to o n l y  f i r s t g r o u p of t h e o r i e s r e g a r d i n g  concerned As  intended  l a s t s e c t i o n of t h i s  economic growth  distinct l i n e s .  growth  behind  i s left u n t i l t h e  Modern two  discussion was  also  "undevel-  go  far  with  not  capital, consider  population  be-  14. The and  other  g r o u p of t h e o r i e s c o n c e n t r a t e m o r e o n the  growth  changes within industrialized e c o n o m i e s .  Very  often the c r i t i c a l  o n e of p r o d u c t i v e  capacity so  problem much  in a n a d v a n c e d e c o n o m y  a s the  i n s u r a n c e of s u f f i c i e n t  m a n d s o that e x i s t i n g a n d a n t i c i p a t e d c a p a c i t y i s f u l l y u t i l i z e d . K e y n e s i a n t h e o r i e s of g r o w t h key  do  d e t e r m i n a n t s of p r o d u c t i v e  labour  force,  erminants  The  c a p a c i t y a s t h e s t o c k of c a p i t a l ,  changing and then a n a l y z e  two  most famous  R.F".  Domar  Harrod.  and  terminant  Harrod  in the g r o w t h  of g r o w t h  process.  Both  tinuously equated with a g r o w i n g  which  they  The  Domar  and  l o o k at t h e  Domar  investment  which planned  models  investment  differ  which  have Domar  in d e t a i l . , b o t h  the  a s the c e n t r a l  de-  problem  investment will be of p l a n n e d  mainly  saving.  i n the w a y  in  process.  a n a l y s i s is c o n c e r n e d mainly  q u e s t i o n of t h e e f f e c t of p r e s e n t  the  change.  t e n d to s e e t h e c e n t r a l  absolute volume  Harrod  in s u c h  s e e m to b e t h o s e of E . D .  consider  a s the c o n d i t i o n s u n d e r  The  the e f f e c t s of the  Without e x a m i n i n g t h e s e m o d e l s approaches  de-  that t h e s e d e t -  t h e o r i e s of e c o n o m i c g r o w t h  q u a n t i f i e d the c h a n g e s i n the e c o n o m y and  but s i m p l y a s s u m e  not  Post  not s e e k to e x p l a i n the c h a n g e  t h e l e v e l of t e c h n o l o g y ,  are  is  w i t h the t e c h n i c a l  investment on future  capacity  and  con-  15. s e e k s to d e t e r m i n e  t h e r a t e at w h i c h t h e e c o n o m y  p r o d u c t i v e c a p a c i t y i s to b e a b s o r b e d model, ment  however,  has actually g r o w n  portant  enough  in the p a s t s o  both the D o m a r  if  abstract and  much  Harrod  dependant  models  do  on rather  rigid  propensity  They  to s a v e a n d t h e c a p i t a l c o e f f i c i e n t s .  investment o r  Purpose  3.  The  and  amount  fundamental  purpose  also  production s e r v e s  of g o o d s  provides  of i n d u c e d  im-  both tend  do,  as  the  however, ef-  investment.  Measurement  of e c o n o m i c g r o w t h  w e l f a r e of t h e n a t i o n ' s p o p u l a t i o n . potential for  saving.  i d e a s of the c a p a c i t y c r e a t i n g  the p h e n o m e n o n  of  assumptions  determinants  f e c t s of net  output  provide  c o n c e r n i n g t h e v a l u e s a n d f i x i t y of s u c h c r i t i c a l  p o i n t out t h e s t r a t e g i c a l l y i m p o r t a n t  invest-  a s to i n d u c e a n a m o u n t  the p r e s e n t full e m p l o y m e n t  and  future  Harrod's  i n s i g h t s into t h e o p e r a t i o n of the r e a l w o r l d e c o n o m y ,  to b e v e r y  if  in the f u t u r e .  l e v e l a n d s e e k s to d e t e r m i n e  s u f f i c i e n t to a b s o r b  Although  grow  u s e s t h e a c c e l e r a t o r c o n c e p t to l i n k c u r r e n t  to c h a n g e s i n t h e o u t p u t  net i n v e s t m e n t  into u s e  must  The  economic growth  this p u r p o s e  and s e r v i c e s available for  the g o v e r n m e n t  obligations without having  by  not o n l y  private  or  increased  i n c r e a s i n g the  private consumption,  w i t h r e s o u r c e s to m e e t  to r e d u c e  i s to i m p r o v e the  but  its i n c r e a s i n g  consumption.  16. Because a  of t h e m o s t  country's w e l l being is on  omic  growth  requires  lation. will  Although  effort,  a  for  mean  a higher  goods  a n a n a l y s i s of  in a n a t i o n ' s  for  i n c r e a s e in g r o s s  s t a n d a r d of  "real ively,  p o s s i b l y be a better consumption"  As  popu-  and  consumption  the  services  measurement.  previously,  capita  and  of r e a l o u t p u t o r  economic growth  individual  but out-  expenditure Since effect-  income  per  growth.  depends  capacity.  as  services  of e c o n o m i c g r o w t h .  e x t e n t o n t h e u t i l i z a t i o n of e x i s t i n g p r o d u c t i v e  prod-  If s u c h r e a l  consumer  b e t h e m o s t r e l i a b l e s t a n d a r d of e c o n o m i c  mentioned  war  population.  i s s t a t i s t i c a l l y a l m o s t i m p o s s i b l e to m e a s u r e measure  of  not e n t i r e l y a d e q u a t e  b e c a u s e m a n y of t h e g o o d s  measurement  a  expenditures per  c o n t r i b u t e to t h e w e l f a r e of a n  it w o u l d s e e m that s o m e  capita would  in  national  living for  l a y s o n total b e n e f i t s r e c e i v e d c o u l d be i n c l u d e d , would  econ-  productive  directed toward defence o r  not b e i n c l u d e d i n t h e m e a n s of  of  the p o p u l a t i o n if m u c h  and s e r v i c e s are  material welfare  s u p p l i e d by the g o v e r n m e n t would  improvement  a possible alternative,  of  changes  a s s u m e d that a n  privately produced measure  an  instance, been  capita does  As  capita b a s i s ,  of t h e i m p r o v e m e n t  a n i n c r e a s e in a n a t i o n ' s o u t p u t of g o o d s  it i s g e n e r a l l y  uct p e r  measure  but a l s o t h e a c c o m p a n y i n g c h a n g e s  not n e c e s s a r i l y m e a n  this output h a s ,  a per  that not o n l y  potential be c o n s i d e r e d ,  for  meaningful  to a  While  great  this  17. d e t e r m i n a t i o n of a c t u a l o u t p u t p o t e n t i a l w o u l d b e the t r u e future  c a p a c i t y a n d w i t h a n e s t i m a t e of u t i l i z a t i o n of t h i s c a p a c i t y w o u l d  l e a d to a f a i r approach side  e s t i m a t e of t h e f u t u r e  would  seem  most  gross  national p r o d u c t ,  difficult without  question a r i s e s whether  in d e m a n d  If o n e  must  e s t i m a t e the  it i s e a s i e r to p r e d i c t c a p a c i t y o r i s it m o r e  accurate or  are  and  population  c h a r a c t e r i s t i c s of t h i s p o p u l a t i o n f i r s t ,  ing f r o m the e s t i m a t e d d e m a n d o r estimate capacity o r  Changes  an  demand  in p o p u l a t i o n a n d c h a n g e s of t a s t e s  p r e f e r e n c e s within this population. f i g u r e s a n d the p r e f e r e n c e  such  e s t i m a t e s o n the  l e a d i n g to t h e s t i m u l a t i o n of i n v e s t m e n t .  t h e d i r e c t r e s u l t of c h a n g e s  to  e s t i m a t e of  output  the aris-  l o g i c a l to  o u t p u t o n t h e b a s i s of t h e a b i l i t y of t h i s  population  produce.  It w o u l d s e e m that b o t h r e a s o n i n g available would  a n d the s t a t i s t i c a l  i n d i c a t e that the e s t i m a t i o n of p o t e n t i a l o u t p u t  than potential d e m a n d w o u l d  be  more  amendable  data rather  to f o r e c a s t i n g  tech-  niques .  4.  Determinants  It s e e m s  and  generally  a n t s of e c o n o m i c g r o w t h  a)  The  S o u r c e s of E c o n o m i c  a c c e p t e d that t h e f o u r  for  a nation may  Growth  fundamental  be taken a s  q u a n t i t y a n d q u a l i t y of t h e l a b o u r  force.  determin-  indicated b e l o w :  18. b)  T h e quantity and quality of the nation's natural r e s o u r c e s .  c)  T h e quantity of real capital.  d)  T h e level of technological attainment of the society.  T a k e n together,  these determinants will largely define the  growth potential for any economy.  Although the above factors can be fairly readily analysed or compared, three .other determinants not quite so easily recognized will certainly have some effect on a nation's economic growth.  These  other determinants tend to be: a)  T h e economic and non-economic factors such as the level of ambition of the population which in themselves tend to affect or determine the changes in the supply of labour, the level of technology,  b)  the stock of capital, etc.  T h e factors of an institutional character which might include the underlying competitive nature of the economy, the distribution of income and wealth, the pattern of consumer taste and forms of business organization.  c)  A l l the factors that tend to determine aggregate demand such as personal consumption, investment trends, flation, money and interest policies, etc.  possibility of i n -  19Although omic growth source  the a b o v e  t e n d s to s t e m f r o m  and r e f e r s  acity in the f o r m  The  of  mainly  equipment,  building,  s e c o n d s o u r c e s of g r o w t h  can result from  improvements  sources.  is first,  two  important  that a l t h o u g h  the q u a l i t y ,  labour  influence, The  econ-  first  main  combined.  a s p e c t s of g r o w t h  that m u s t  be  of o u t p u t  considered is  determin-  a n d e f f i c i e n c y of u s e of p r o d u c t i v e  in d e m a n d .  s e c o n d c o n s i d e r a t i o n i s that t h e r e  Canadian  the  in the e f f i c i e n c y w i t h  t e n d s to d e v i a t e a r o u n d  comprehensive  productivity  in t h e p r o d u c t i v e q u a l i t y of  the a c t u a l g r o w t h The  cap-  resources.  i s a n i n c r e a s e in  the a c t u a l potential g r o w t h  quantity  the  and productive  and natural  improvements  the p r o d u c t i v e f a c t o r s a r e  The  e d by  main  to t h e i n p u t s of  f a c t o r s of p r o d u c t i o n a n d f r o m which  two  much  i s t h e i n c r e a s e i n t h e q u a n t i t y of p r o d u c t i v e r e s o u r c e s of  economy  which  f a c t o r s c a n all exert  resources,  t h i s p o t e n t i a l d u e to have  changes  been  no  a n a l y s i s d o n e o n t h e s o u r c e of e c o n o m i c g r o w t h  of  the  economy.  Although  it w o u l d b e v e r y  d i f f i c u l t to d e t e r m i n e  the e x a c t  p o r t i o n that e a c h h a s c o n t r i b u t e d to t h e e c o n o m i c g r o w t h the p r i m a r y  or  s e e m s to h a v e  e s s e n t i a l i n g r e d i e n t s of been:  Canadian  of  productive  pro-  Canada, growth  20. Labour  Input  B e s i d e s the a c t u a l i n c r e a s e in t h e due  to p o p u l a t i o n  women  have  force  continue force  tended  in r e c e n t  numbers  increases,  years.  l e a v i n g the  labour  by  force.  During  the p o s t - w a r  creasing rapidly  in the  non-farm  States.  The  production head  and  l e v e l of  period,  in  been  probably  and will  Taken  for  t r a t e d in c a p i t a l i n t e n s i v e  to t h o s e  on  high  higher  this s e e m s  resulting  industry  and, than  the  been  worker  in the  machinery  mining  United  short  t e n d s to b e  industries such as  in-  especially  to b e t h e  in high  those  entering  a capital per  is very  Canadian  labour  e d u c a t i o n attained by  is generally  in C a n a d a of  labour  t h i s in c r e a s e  the c a p i t a l s t o c k h a s  in C a n a d a  sectors,  much  has  as compared  main r e a s o n s  runs that  the  in C a n a d a .  the i n v e s t m e n t  there  of t h e  by  i n c r e a s e in t h e q u a l i t y of t h e  force  labour  basis,  force,  force  increased participation  Accompanying  to b e a g r a d u a l measured  i n the w o r k  to a c c e l e r a t e t h e g r o w t h  in the w o r k  as  the  number  and  overconcennews-  print .  Increased, Efficiency. Resulting from a continued  increase  in p o p u l a t i o n ,  larger scales  21 . of  production  greater  d)  s p e c i a l i z a t i o n of  e f f i c i e n c y i n t h e u s e of  Industry  It h a s  and  productive  has  allowed  resources.  Shifts  been  that a s  production  estimated by  much  employed  a s twenty  may  the E c o n o m i c  C o u n c i l of  p e r c e n t of t h e r e a l  be a c c o u n t e d for  by  the  income  labour  productive  industries such as agriculture or  productive  s e c t o r s s u c h a s utilities o r  Canada^ per  moving fishing,  finance  and  person from  to  low  high  insurance  services.  W i t h the a b o v e both  Canada  a n d the  ized  countries,  the  s o u r c e s of e c o n o m i c g r o w t h  in m i n d ,  U n i t e d S t a t e s i n d i c a t e that e v e n  most  important  productive  studies  in highly  resource  in  industrial-  of a n y  economy  2 is  its p e o p l e .  seventy-six and  From  percent  approximately  proportions to a s s u m e  have  ^Second  of  Canadian  percent  p e r s i s t e d for  many  change  gradual  Annual  it i s i n d i c a t e d that  national  twenty-two  that a n y  p l a c e at a v e r y  such studies,  income  approximately  a c c r u e s to the  a c c r u i n g to p r o p e r t y . decades,  that m i g h t o c c u r  it w o u l d  seem  i n the f u t u r e  As  labour these  reasonable  would  take  rate.  Review,  Economic  C o u n c i l of  Canada,  1965,  p.  56.  1965, p.  56.  o Economic  C o u n c i l of  Canada's  Second  Annual  Review,  22. Concerning technological ways  but  t w o of t h e  improvement  progress  may  become  constant.  This  reshaped abstract  possible  to h i g h e r  the  and  and  and  possibly  if t h e q u a n t i t y  technological  p o s s i b i l i t y of s u b s t a n t i a l  interact  either  unlimited  the fixed quantity  higher  progress, in  various  could  result  other.  even  mean  in e c o n o m i c  capital accumulation  continued  would  elements  c a n be s e p a r a t e d  without  Theoretically, gress  and  in p r i n c i p l e they  in e c o n o m i c  major  progress  economic  of c a p i t a l i s  kept  of c a p i t a l c o u l d  efficiency with  pro-  be  at l e a s t  w i t h c a p i t a l at a  the  constant  level.  It w o u l d gress and  seem,  a n d the f o r c e s  therefore  however, which  that t e c h n o l o g i c a l k n o w l e d g e  t e n d to i n c r e a s e  little a m e n d a b l e  to t r e a t m e n t  it a r e  or  extremely  b y the t o o l s of  pro-  diverse  economic  analysis.  On  an aggregate  productivity sion.  But  and  introduce  is therefore  to r a i s i n g  it i s m o s t advanced  homogenous product  capital formation  alone,  productivity.  advisable techniques. and  r a i s e s output  c l o s e l y a s s o c i a t e d with e c o n o m i c  capital accumulation  ive stimulant increase,  view,  however, For  product  i s not t h e per  expan-  most effect-  worker  to u t i l i z e c a p i t a l of a " b e t t e r "  and  to  quality  W i t h t h e r e s u l t that c a p i t a l i s not  depending  on  the p a r t i c u l a r  location,  or a  nature  23. a n d t i m i n g of t h e i n v e s t m e n t ,  One such  of the c r u c i a l  as Canada,  ion and  both s e c t o r s , both  industries.  must g r o w  depending  on  c a p i t a l i n the t w o  raw  materials,  The  theory  and  nor  c a n it o f f e r - a n y  of t h e  product-  course and  the r e l a t i v e e f f i c i e n c y  s e c t o r s a n d the r e s p e c t i v e m a r k e t s  manufactured  goods.  c a n i d e n t i f y t h e f a c t o r s to b e  an " a n s w e r "  for  considered,  w h i c h i s a p p l i c a b l e to a l l i n s t a n c e s  final d e c i s i o n c o n c e r n i n g the  long-term  structure  economy.  The really  primary  a v o i d r e s t r i c t i n g b o t t l e n e c k s in  t h e s t a t e of e m p l o y m e n t ,  of g r o w t h  but it c a n n o t p r o p o s e  country  s u c h v a r i a b l e s a s the e x i s t i n g l e v e l  of  food,  To  in a  in a b a l a n c e d f a s h i o n w i t h t h e  population,  and  c a n be s u b s t a n t i a l .  questions concerning growth  d i s t r i b u t i o n of labour  growth  i s t h e a l l o c a t i o n of c a p i t a l b e t w e e n  manufacturing  of d e v e l o p m e n t  its effect o n  a l l o c a t i o n of c a p i t a l b e t w e e n e c o n o m i c s e c t o r s s e e m s to  a choice  about  means  p r o d u c t i v i t y a n d output i s both ultimately  rather  be  t h a n e n d s w i t h t h e i m p l i c a t i o n that  primary  and  secondary  sectors  should  be r a i s e d .  If the a s s u m p t i o n of a c l o s e d e c o n o m y is r e m o v e d ,  tendency  for  in the a b o v e  the i n t e r n a t i o n a l m a r k e t f o r  m a t e r i a l s to b e i n e l a s t i c , b o t h t h e o r y  and  f u l l y d i r e c t i n g c a p i t a l into m a n u f a c t u r i n g  discussion  food a n d  logic w o u l d suggest  raw purpose-  a s a m e a n s of r e d u c i n g  the  24. dependence  on  The a l l o c a t i o n of pecially  primary  exports  c o n c e p t of  "balance"  capital between  in l e s s d e v e l o p e d  to w h e t h e r advanced tively few  people,  the two  would  be  systematic knowledge  i n the q u e s t i o n  an important  up  question  of  further of h o w  arises  c a p i t a l i n the e m p l o y m e n t  scale labour  to h a v e growth,  E s -  l a r g e - s c a l e units  intensive  the c a p i t a l output r a t i o .  certainly appear  p r o c e s s of g e n e r a t i n g  a factor  directed toward  to s m a l l e r  w h i c h w i j l t e n d to l o w e r  is also  imports.  i n d u s t r i a l s e c t o r s of the e c o n o m y .  which use  or  secondary  countries,  capital should technology  and  although  using  of  rela-  enterprise  The  different  as  choice  between  e f f e c t s in the long there  i s a s yet  t h e s e effects w i l l in fact w o r k  run  no  themselves  out.  Although of  capital formation  i n d i v i d u a l s to s a v e ,  a c t i o n of not o n l y  individuals.  can have omy. a given  large  Ror  The  a b i l i t y of g o v e r n m e n t s  their o w n  effects o n  example,  borrowing,  on  the  willingness  and  a c c o u n t in l a r g e a n d  increasing  its m e t h o d  of  the  agencies and volumes  capital a c c u m u l a t i o n in an  if a g o v e r n m e n t c h a n g e s by  public  on  i n d i v i d u a l s but to a c c u m u l a t e  the r a t e of  b u d g e t of e x p e n d i t u r e s  a m o u n t of  primarily  not a l l a c c u m u l a t i o n of c a p i t a l d e p e n d s  to i n f l u e n c e t h e a c t i o n s of  dissipate capital on  depends  econ-  financing  increasing taxes and reducing  a considerable  i n c r e a s e i n the t o t a l c a p i t a l  the  25. a c c u m u l a t i o n of the e c o n o m y  "The o t h e r is population.  The  major  factor  fundamental  d e c l i n e s of p o p u l a t i o n s a r e appear  will take p l a c e .  been  It a p p e a r s  the f u n d a m e n t a l  precise  cannot be e x p l a i n e d by  interdictions, spent l u x u r y ,  or  other  that i n c r e a s i n g l y p o p u l a t i o n g r o w t h  fact r e m a i n s  a s w e l l a s by  acute  possible  is affected  economic factors.  that t h e p o p u l a t i o n  governments  and economic growth,  g r e a t e s t effect in r e c e n t y e a r s h a s b e e n demand through appropriate q u a t e to a b s o r b economy.  acity.  in a  do  problem  by As  has  not  solved.  Concerning  also  a n d of t h o s e that  to b e r e a d i l y e m b o d i e d  the e n t i r e s o c i o l o g i c a l e n v i r o n m e n t such,  or  framework.  specific moral  variables.  development  f a c t o r s that a f f e c t t h e g r o w t h  It s e e m s f l u c t u a t i o n s of p o p u l a t i o n s poverty,  economic  not w e l l u n d e r s t o o d ,  significant, few appear  theoretical  in l o n g - t e r m  possibly  t h e i r a b i l i t y to a f f e c t  p o l i c i e s in a n e f f o r t to e n s u r e  into u s e w h a t e v e r  productive  capacity exists  to i n f l u e n c e the d e t e r m i n a t i o n of  C e r t a i n l y the p r o b l e m  the c o m p l e x p r o b l e m s  involved  i s not s o  aggregate  a level  It f o l l o w s t h e n that the a b i l i t y to a f f e c t a g g r e g a t e  y i e l d s the p o w e r  their  ade-  in t h e demand  productive  cap-  simple as indicated above  and  in d i s a g g r e g a t i n g  government  a n d p r i o r i t i e s must r e c e i v e the fullest c o n s i d e r a t i o n f o r  demand  a n a n a l y s i s of  26. g o v e r n m e n t d e m a n d to b e f u l l y the p r o b l e m sector and  of  determining  w i t h the  public activity c e n t e r s as government expenditures however,  most  primarily  and  satisfactory  to b e  conclusion,  considerations  s e l f the c e n t r a l a s p e c t of ample,  purely  theoretical structure  One  depending  Or  increase again,  overshadow it i s  as  defined  on  economic  on  concerned  which  v i e w of the and  independent  such  transfer Again, product-  no  entirely  to b e v a l i d a t e d  investment  growth. in h u m a n  of s k i l l of  the  of t h e a c c u m u l a t i o n changes and  from  of c a p i t a l i s not i n  economic  capita b a s i s ,  aggregates  in the  where  the  developed.  appears  degree  with  demand.  changes  theorizing  t h e r a t e of c a p i t a l a c c u m u l a t i o n  channelled.  to b e  government  aggregate  yet b e e n  t h e p r o c e s s of  a per  public  complex  dealing  in w h i c h  services,  variables  has  theory  i s that t h e a c c u m u l a t i o n  on one's  productivity  and  l e v e l of  however,  c e r t a i n l y r a i s i n g the e d u c a t i o n a l will  is just beginning  the w a y  of g o o d s  the e f f e c t of t h e a b o v e  the a c t i v i t i e s of the  that  sector.  on  t a x e s a f f e c t the  however,  capacity is extremely  existing economic  purchases  capacity tends  the a b o v e  productive  a s p e c t s of t h i s  a result,  It a p p e a r s ,  in w h i c h  a n a l y s i s of t h i s s e c t o r  quantitative  As  ive  the w a y  affect the e c o n o m y ' s  economic  meaningful.  For  it-  ex-  resources, population  of  capital.  in p o p u l a t i o n  the d i r e c t i o n to  may  which  27.  To  s u m m a r i z e the a b o v e c o m m e n t s then,  industrialization  is a n e c e s s a r y  to what  concomitant of g r o w t h ;  distribution  of output and employment between p r i m a r y  secondary  manufacture,  and the s e r v i c e  sector;  of e c o n o m i c development and p r o g r e s s .  5.  d o e s not exist and its possibility  Structural  Defined,  production,  sectors;  a p p e a r a n c e of l o n g - t e r m fluctuations o r  e c o n o m i c v a r i a b l e s would all find an integral  theory  the changing  the tendency of  t e r m g r o w t h r a t e s to decline in s p e c i f i c i n d u s t r i e s o r apparent u n i v e r s a l  extent actual  still s e e m s r a t h e r  the  trends  place in the ideal  N e e d l e s s to s a y ,  long-  in  theory  such a remote.  Change  structural  change may be taken to mean both the  c h a n g e s in the s e c t o r i a l o r i g i n of a nation's income and the c h a n g e s in the occupational distribution  Although  of the nation's labour  force.  much w o r k h a s been done in a n a l y z i n g  structural  c h a n g e s within a d v a n c i n g e c o n o m i e s , the b a s i c c a u s e s s e e m to  re-  main c o m p l e x and somewhat o b s c u r e .  which  s e e m to e m e r g e ,  however,  The  three  a s the most influential  main f a c t o r s are:  a)  the c h a n g e in the p h y s i c a l quantity of e c o n o m i c  b)  c h a n g e s in the techniques of  c)  c h a n g e s in the d e m a n d for final g o o d s and  resources  production services.  28. Although have the  an  ultimate  upon is  of  nological  elastic,  or  depend for  economic  economy's  on  the  the  resources  productive  capacity can  economy's  demand  relative mainly  the  which  increase  tend  thereby  to  for  the  the  the  most is  An  not  and  important to  expand  other  the  to  will  capacity be  basic  and  utilized,  structure  product  of  the will  whose  supply  to  e f f e c t of  example  of  impact  cause  into  for  the  to  be  price  of price  their  industry  and  technological advance reduce  employment this  tech-  could  be  price,  income or  seem  then  that  both  the  or  but  elsewhere  l o g i c of  in-  capital rather in the  the  c a s e of  pure  theory  to ec-  agricult-  ure.  It w o u l d  pro-  importance.  tends  or  and  of  levels will demand  sect-  price  costs  resources  production for  both  relative  increased  its r e l a t i v e  industry  The.  the  income  have  industries or  e l a s t i c i t y of  reduce  general  resources  outstanding  on  additional  increase  the  importance  sectorial product.  tends  draw  cases where  labour  onomy.  to  the  elastic industries  and  investment free  of  demand  will  In  of  productive  changes of  supply  the  the  character  development  and  sector  such  changes  the  income  ducts  upon  which  economy  production and  in the  affected.  the  income  of  the  Such of  effect  under  impact  function  ors  change  immediate  conditions  depend  a  and  29.  e x i s t i n g e m p h i r i c a l e v i d e n c e p o i n t s to t h e f a c t that a d e v e l o p i n g omy  w i l l be u n d e r g o i n g  ive s t r u c t u r e . the s o c i a l a n d grow,  investment  o u t c o m e of men.  important  c h a n g e s in its  i m p o r t a n c e of f i n a l d e m a n d d i c t a t e s that  political f r a m e w o r k  and however  aggregate  many  The  constant and  for  within w h i c h a country  s t r a t e g i c a s p e c t s of s a v i n g s ,  policies may  expansion will  depend  econproduct-  whatever  a t t e m p t s to  population  be c o n t r o l l e d , the p a c e ,  path,  and and  u p o n t h e c h o i c e s a n d a c t i o n s of  Ill.  A.  P O P U L A T I O N  Introduction  As there  d i s c u s s e d i n the t h e o r y  i s no  variables  concrete theory  to h a v e  making population  They ting w h a t and or  indicating exactly h o w  affecting population g r o w t h  curate population f o r e c a s t . presume  c o n c e r n i n g population f o r e c a s t i n g ,  do,  any  The  may  have  be  levels.  The  natality,  constant o r  not in  mortality,  calculation can also  at  more  system-  i n a g e - s p e c i f i c r a t e s of  natality,  immigration.  large e r r o r s  economic,  trends  ac-  calcula-  operate  of p a s t p o p u l a t i o n f o r e c a s t s h a v e  because large and unpredictable changes have  The future  f o r e c a s t i n g the f u t u r e  if r a t e s of  should either r e m a i n  a t i c a l l y t a k e into c o n s i d e r a t i o n t h e t r e n d  basic  do  the a b i l i t y a n d the t o o l s f o r  population w o u l d  less arbitrarily assumed  mainly  in e f f e c t i n g a n  r e s u l t i s that d e m o g r a p h e r s  m y s t e r i o u s talent f o r  however,  net i m m i g r a t i o n  The  known  projects.  the f u t u r e  mortality and  be u s e d  e v e n the  social,  and  o c c u r r e d in the  c u l t u r a l f a c t o r s affecting vital p r o c e s s e s .  m a k i n g of r e a s o n a b l e in n a t a l i t y ,  occurred  mortality,  and justifiable a s s u m p t i o n s and  immigration  a n d about  about basic  31 . f o r c e s affecting s u c h t r e n d s ing population what  projections.  assumptions  to m a k e  If o n l y o n e assumption and  would  immigration  future. know  The  main  and how  projections  and  problem  many  i s to b e  important  p a r t of  of the r e c e n t  alternate  provided,  past w i l l continue  B e c a u s e a l l that w e  really  the a c t u a l ,  past p r o v i d e  a solid,  "know"  the c o n c r e t e , objective  mak-  i s that of d e c i d i n g  the  most  unchanged  of t h e f u t u r e measurable  b a s i s for  just  p r o j e c t i o n s to  make.  reasonable  s e e m to b e that t h e v i t a l r a t e s of n a t a l i t y ,  of t h e p a s t ,  recent  is a n e c e s s a r y  mortality, into  the  is what f a c t s of  the m a k i n g of  we the  project-  ions.  The  c h i e f w e a k n e s s of  a s a basis for  events  i s that s o m e  as w a r  such  a n e x t e n t that t h e p r o j e c t i o n s w o u l d problem  serious one  The  may  have  e v e n t of t h e r e c e n t  disturbed  the  normal  be a b n o r m a l  and  of s e l e c t i o n of a p e r i o d o n w h i c h to b a s e but  it c a n n o t  be  1945-1965  economy  period.  are  based  mainly  past  trends  to  unreliable.  projections  has  not  on trends  D u r i n g the p o s t - w a r  has e x p e r i e n c e d a vast a r r a y there  past  is a  avoided.  f o r e c a s t s in t h i s s t u d y  p e r i e n c e of the Canadian  a depression  a n d t r e n d s of the r e c e n t  unusual  such  The  or  projections  using  but at t h e s a m e  time,  been  any  s i o n s that m i g h t  s i g n i f i c a n t l y affect the v a r i a b l e s  and  period,  of e c o n o m i c  serious w a r s  or  u p o n w h i c h the  ex-  the  conditions deprespopulation  32. forecasts are  B.  made.  Methodology  The  standard  lation d i s t r i b u t i o n by  population age  and  c o h o r t of the b a s e a g e - s e x  projection  s e x for  technique  the f o r e c a s t b a s e  mortality  resent  r a t e s by  mortality  age  and  during  periods  of t i m e r e q u i r e s  or  distribution. to v a r y sex  Each  a  for set  adequate  to r e p -  of t i m e  subse-  specific periods  a s e t of a s s u m p t i o n s  of t h e f e m a l e  immigration,  time p e r i o d Although  with different  population. births  during  particu-  a g a i n the a s s u m e d  the total n u m b e r  s t r u c t u r e of the i m m i g r a n t s  to  population.  is generally  time p e r i o d s ,  about  The  t h e a p p l i c a t i o n of t h e s e f e r t i l i t y r a t e s  s t r u c t u r e of the f e m a l e  In the c a s e of year  date.  step r e q u i r e s  deemed  to y i e l d e s t i m a t e s of t h e n u m b e r of  the s i z e a n d  each  are  births requires  the t r e n d of f e r t i l i t y i n e a c h c o h o r t  lar  popu-  rate.  E s t i m a t e s of f u t u r e  computations  This  sex which  in e a c h c o h o r t  q u e n t to the b a s e  a  d i s t r i b u t i o n i s d i s t i n g u i s h e d to a c c o u n t  m o r t a l i t y r a t e s w i t h t h e p a s s a g e of t i m e . of  requires  broken of  most  to r e m a i n  down  total f i g u r e  by  immigrants  age  may  forecasts assume  and be  for sex  assumed  the a g e  constant.  It c a n b e s e e n that w i t h e s t i m a t e s f o r  mortality  for  each  age  and  33. and sex  b a n d of t h e p o p u l a t i o n a n d t h e a s s u m e d a d d i t i o n to e a c h  a n d s e x b a n d d u e to i m m i g r a t i o n , c a l c u l a t i o n to f o l l o w bands for the f i r s t rate  each  t h e p e r i o d of t h e f o r e c a s t .  assumed over  Although lation is r a t h e r  purely  a  age and s e x g r o u p through  age g r o u p w i l l ,  interval  it b e c o m e s  as  The  natural  indicated p r e v i o u s l y ,  mechanical  the c h o s e n  increase  fertility  the  is the m o s t  chosen.  natality,  mortality,  and immigration rates  p r o j e c t i o n s of t h e total p o p u l a t i o n f o r w i d e of t h e  two  of t h e n u m b e r  First,  of w o m e n  females already  changes  e v e n ten o r  is cumulative fifteen y e a r s  s e e m s t h e p r o j e c t i o n of p o p u l a t i o n f i g u r e s  main r e a s o n s .  available  assumed  in t h e and  can  be  mark.  It a l s o  supply  popucommon  It i s to b e n o t i c e d that t h e e f f e c t of t h e m a r g i n of e r r o r  for  up  population.  t h e s i z e of t h e a g e b a n d c h o s e n to s e g m e n t it s e e m s t h a t f i v e y e a r s  age  making  d e p e n d o n the  t i m e a n d t h e a g e s t r u c t u r e of t h e f e m a l e  arbitrary,  age  leaving aside  immigration,  in the c h i l d b e a r i n g  age bracket  born and second,  in fifteen y e a r s in b i r t h r a t e s  nearly  have already  will  all the w o r k e r s  been b o r n with  thus have virtually  d u r i n g the next fifteen  years.  is  convention the  projection  is b a s e d  on  potentially  the r e s u l t  no e f f e c t o n t h e  that  labour  34. Another much  simpler  not b r o k e n rates are over  m e t h o d of f o r e c a s t i n g f u t u r e  and  down made  much  cruder.  into a g e o r on  With t h i s m e t h o d ,  sex groups  the b a s i s of p e r  t h e p e r i o d of t h e f o r e c a s t .  population  the p o p u l a t i o n  but t r e n d s  thousand  estimates is  in b i r t h a n d  population and  A g a i n the a s s u m e d  is death  applied  immigration  l u m p s u m f i g u r e s a n d a d d e d to the e x i s t i n g p o p u l a t i o n  during  are  each  time  period.  Because mentioned  of the m a n y  forecast methods,  c u r a t e a s the m o r e important  uncertainties involved the c r u d e  method  in e i t h e r of the  may  prove  however,  would  f i c a t i o n of s t r u c t u r a l c h a n g e s t a k i n g p l a c e w i t h i n the  A  ac-  The  most  more  important  a s a b a s i s for  b e the  identi-  population.  t h i r d m e t h o d of e s t i m a t i n g p o p u l a t i o n g r o w t h  s i g n s of b e c o m i n g  just a s  sophisticated a g e - s e x specific method.  a d v a n t a g e of t h e l a t t e r m e t h o d ,  two  that  future  shows  f o r e c a s t s is  1 based on  econometric analysis.  to c o r r e l a t e a g e and  The  attempt i s m a d e  in t h i s a n a l y s i s  s p e c i f i c birth a n d death r a t e s with s e v e r a l  economic  sociocultural indicators. The  c o n c l u s i o n w a s r e a c h e d that t h e r e  e n c e of a g e s p e c i f i c b i r t h a n d socioeconomic variables.  is a systematic  d e a t h r a t e s u p o n s o m e of t h e  It w a s  also concluded, h o w e v e r ,  i n f l u e n c e of s o c i o e c o n o m i c v a r i a b l e s u p o n the d e m o g r a p h i c ' i r m a A d e l m a n ; A n E c o n o m e t r i c A n a l y s i s of A m e r i c a n E c o n o m i c R e v i e w , J u n e , 1963.  depend-  important that t h e  features  Population  of  Growth,  35. a society is v e r y upon economic  The crude  method  used  would  d e a t h r a t e s to t h e t o t a l p o p u l a t i o n .  to the s i m p l i c i t y a n d  In s u b s e q u e n t  depth  not o n l y  death and for  the  two  methods  C.  Birth  At  may  be  present,  this high  25 p e r  that t i m e ,  used  In d o i n g  method.  and assumptions  in t h i s s t u d y  so,  be  e x p l o r e d to but a l s o  it i s h o p e d  be p o s s i b l e a n d s p e c i f i c p r o b l e m  used  that  for  compari-  a r e a s of  the  Rate  Canada  h a s o n e of t h e h i g h e s t b i r t h r a t e s of  a n d o n e of t h e m a i n  birth rate will r e m a i n  Historically, about  rea-  examined.  industrialized country whether  c o n v e n i e n c e of the  immigration rates are  method  the a g e - s e x s p e c i f i c t e c h n i q u e . s o n s of a c c u r a c y m a y  main  in a c c u r a c y w o u l d  s e c t i o n s , the m e t h o d o l o g y  the b i r t h ,  The  the  i s that the u n c e r t a i n t i e s in a l l the  i n d i c a t e the p o s s i b l e s a c r i f i c e  minimal a s c o m p a r e d  to d e t e r m i n e  growth  in t h i s s t u d y w i l l b e the a p p l i c a t i o n of  accepting this method  methods  greater  s m a l l e r t h a n t h e e f f e c t of p o p u l a t i o n  development.  birth and  s o n s for  much  the c r u d e  thousand  birth rate  population in  the b i r t h r a t e h a s  been  1920  any  q u e s t i o n s to b e a s k e d i s  at t h i s h i g h  level.  d e c l i n e d in C a n a d a to a b o u t  19 i n  from  1937.  i n c r e a s i n g and between  1948  Since and  36. 1959, 27.1  the c r u d e and  birth r a t e h a s r e m a i n e d  28.5.  Recently,  however,  remarkably  the r a t e h a s  stable  been  between  declining  and  1 in  1962  s t o o d at The  for  women  25.3.  same  general  during  this pattern w a s  p a t t e r n c a n be s e e n in a g e - s p e c i f i c  this s a m e  period.  The  most  c o n f u s i n g a s p e c t of  that t h e s e c u l a r d e c l i n e i n b i r t h r a t e s w a s  to c o n t i n u e s h o r t l y a f t e r t h e w a r  i n s t e a d of  groups  its s t e a d y  expected  i n c r e a s e until  1959.  Some crude 21  important  b i r t h r a t e at 2 5 to 28 r a t h e r  would  1)  of the m o r e  be a s  High  r e a s o n s that t e n d to m a i n t a i n t h a n t h e d e p r e s s i o n r a t e of  b i r t h r a t e s t e n d to b e c o r r e l a t e d w i t h h i g h c o n f i d e n c e in t h e  f u t u r e of C a n a d a w i l l t e n d to m a i n t a i n a h i g h I n c r e a s e d opportunities for economy  becomes  household 3)  Ramily  1  Canada  women  to w o r k  periods  birth  a s the  rate. Canadian  m o r e ! i n d u s t r i a l i z e d s e e m s to m e a n  formation,  earjy  families,  and  larger  e s p e c i a l l y in the l o w e r  Year  Book,  1965,  p.  income  234.  groups.  of  economic  early  families.  A l l o w a n c e P l a n s t e n d to m a k e t h e b u r d e n of  lighter,  20 to  follows:  e c o n o m i c activity a n d the high  2)  the  families  37. 4)  Although  based on only one  f o u n d b e t w e e n t h e s i z e of 5)  The  f a c t that t h e F r e n c h  non-French about o n e  Canadian  to o n e  1  study  income  , a positive correlation  a n d s i z e of  Canadian  family.  p o p u l a t i o n r e l a t i v e to t h e  population h a s r i s e n f r o m one  and one-half  was  has s h o w n two  to t w o  to  significant factors  2 affecting the C a n a d i a n a)  s h a r e of t h e t o t a l p o p u l a t i o n  rates are b)  above  the F r e n c h  There may  rate.  it t e n d s to r a i s e t h e b i r t h r a t e a s t h e F r e n c h growing  rates  birth  are,  the r a t e s f o r  birth r a t e s a r e ,  however,  The  because their  the n o n - F r e n c h  however,  reasons why  b e e x p e c t e d to d e c l i n e .  make  up birth  population.  declining.  the c r u d e  Canadian  main r e a s o n s a r e  birth  as follows:  1 C . V . K i s s e r and P . K . Whelpton, S o c i a l and P s y c h o l o g i c a l F a c t o r s Affecting F e r t i l i t y ( N e w Y o r k , 1 9 4 9 ) , p. 4 1 3 .  2 p.  N. 78,  B.  Ryder,  Components  of  Canadian  a  Population  Growth,  38. 1)  The  Canadian  marriage  rate  is falling a s indicated b e l o w  in  1 Table  T A B L E  1:  1  M A R R I A G E S  P E R  T H O U S A N D  P O P U L A T I O N  Year  2)  1933  11.0  1941  10.6  1951  9.2  1960  7.3  1962  7.0  The a  3)  Marriage  At  i n d u s t r i a l i z a t i o n of a c o u n t r y  long-run present,  highest  d e c l i n e in b i r t h the c u r r e n t  in a n y  the r a t e w o u l d dustrialized  1  Canada  Year  is generally  country  and  d e c l i n e s o a s to b e  countries.  Book  -  1965,  associated with  rates.  b i r t h r a t e of  developed  Rate  p.  260.  Canada  i s o n e of  the  it w o u l d b e e x p e c t e d that  more  in l i n e w i t h o t h e r  in-  39. Any  forecast,  fertility r a t e s for above  factors and  expected future  whether  women  24.2  and  women Here 60/0  make  classes, some  over  the R o y a l  the  1960  the s a m e  must  a s s u m p t i o n s about  to  1980  period.  28.4  in  This  same  in a l l the a g e  1965  the the  p e r i o d e x c e p t in the  15-19  a n d t h e n a c o n t i n u a l d e c l i n e to 5 7 . 0  a s s u m p t i o n of t h e t r e n d t o w a r d  earlier  marriages  economic  1955  to  between  p a t t e r n of  specific groups year  t h e a s s u m p t i o n of a j u m p i n f e r t i l i t y r a t e s f r o m in  or  consider  C o m m i s s i o n on Canada's  birth r a t e s w a s a s s u m e d  over  birth r a t e s  rates.  e x p e c t e d t h e b i r t h r a t e to d r o p f r o m 25.6  declining  past data,  in b i r t h  In t h i s r e g a r d , prospects  with age specific  using  trends  it i s b a s e d o n c r u d e  to  age  55.0  of  group. in  1955  to  1980 r e f l e c t s the  and earlier  family  formation.  In t h e G a v e s of  median  rate,  a n d H o l t o n s t u d y * i n s t e a d of c h o o s i n g s o m e  sort  birth rate projection and basing a single projection on  that  the s t u d y u s e d a h i g h ,  g r o u p to c o m p u t e for  doing  forecast  R. Harvard  three  low,  and  median  birth rate for  alternative population projections.  t h i s w a s to d i s c e r n t h e m a r g i n a r i s i n g f r o m any  poor  B . C a v e s and R . University P r e s s ,  of e r r o r  in t h e i r  The  each  reason  population  p r o g n o s t i c a t i o n s of t h e b i r t h r a t e .  H . Holton, T h e 1961, p. 266.  Canadian  age  Economy,  The  comedian  p r o j e c t i o n of t h i s s t u d y  b i r t h r a t e of a p p r o x i m a t e l y which  it w o u l d  c a t e d by  toward  the l o n g - r u n  prewar  reviewing  estimate may  study  low.  slightly  After  ary  1970's a  due  crude  the  i n the  to the p o s t - w a r  b i r t h r a t e of  1965-1980  give  a point  derived  by  period.  estimation, studying  rate  during  "baby  D.  p a r t of t h i s  Death  In  it w o u l d and  the  boom",  23.5  Although some  1960  after  20-22 as  appear  the C a v e s  the  and  indi-  and  to m a i n t a i n t h e h i g h  using  degree  late  1960's  the p r e s e n t  24.5 the  Royal Holton  the b i r t h r a t e a n d a s s u m i n g  would  median  a  a n d the study  and  birth  temporearly  assumed  be r e a s o n a b l e  r a t e of  24.0  of t h e e x p e c t e d v a r i a t i o n  t h e r e s u l t s of t h e C a v e s  e x p e c t e d v a r i a t i o n in the p o p u l a t i o n latter  b i r t h r a t e s of  studies,  b e too h i g h  between  until  crude  trend.  to l o w e r  marriage  the h i g h  maintained  c o n s i d e r i n g the f a c t o r s tending  those tending  surge  be  the l o w e r  the t w o  Commission's  rate and  28 w o u l d  return  Upon  correctly assumed  Holton  for  will may  study.  be  This  f o r e c a s t w i l l b e d i s c u s s e d in t h e  chapter.  Rates  marked  death r a t e s  c o n t r a s t to t h e v a r i a t i o n s  in C a n a d a  have  followed a much  in the b i r t h r a t e s , more  the  stable c o u r s e .  Even  41 . this apparent  steady  d e c l i n e in the death r a t e ,  l e a v e the f o r e c a s t e r w i t h o u t With the g r a d u a l  certain  however,  i n c r e a s e in p o p u l a t i o n d e n s i t y a n d  sanitation and  m e d i c a l s e r v i c e s , the c r u d e  has gradually  halved during  t h e 80 y e a r s  from  2 2 to  11.  not  problems.  and improved  dropping  does  between  1850  It d e c l i n e d to s l i g h t l y o v e r  urbanization  death and  rate  1930,  e i g h t i n the  late  1 1950>s a n d d r o p p e d to a l o w of  7.7  of the l o w e s t d e a t h r a t e s  world.  For are  shown  T A B L E  comparative  in t h e  purposes,  1961  and  1962.  This  t h e d e a t h r a t e s in t h e  2. S T A T E S  (deaths  per  D E A T H  1000  Vear  R A T E S  population)  Death  Rate  1910  14.7  1940  10.8  1950  9.6  1961  9.3  1962  9.5  1963  9.6  1964  9.4  Canada Y e a r B o o k -  1965,  S t a t i s t i c a l A b s t r a c t of t h e  p.  244,  United S t a t e s ,  1965,  p.  is  one  United States  b e l o w :^  UNITED  2  in  47.  42. W h e n the mate s e c t o r lower early  population  death r a t e s ,  two  mortality r a t e s for  r a t e of most  tendency  Above  these a g e s ,  One  reason  stand out.  in all a g e  Second,  the  may  be  T A B L E  Canada  First  groups  to  i s the  higher  men  for  under  lower  ages.  50 a n d f o r  The  women  the death r a t e h a s r e m a i n e d  that t h e d e a t h r a t e  has  lagged  s e e n f r o m the T a b l e  under  in C a n a d a  behind  infant  other  55  relatively  may  advanced  P E R  1000  be  1  United  60  47  1950  39  27  1960  27  26  1964  This  countries  States  2  18  Book,  1965,  A b s t r a c t for  the  p.  252.  United  States,  the  1965,  p.  been  e x p e c t e d to  BIRTHS  1940  Statistical  a  years.  below.  MORTALITY  the  constant.  mortality.  Canada  Year  in  death r a t e h a s  Year  Canada  generally  shown  3. INFANT  esti-  except those  mortality r a t e s have  d e c l i n e i s the s c o p e a v a i l a b l e in r e d u c i n g field w h e r e  sex groups  to d e c l i n e at a r e l a t i v e l y c o n s t a n t r a t e w i t h  decline being  significant for  into a g e -  features  women  childbearing age.  pronounced  is divided  56.  is and  one  43. Another the  fact  death will  that  rate  of  a  is  of  low  rate  that  the  paper  period  for  assume  constant  within  When to  use  would  indicate  up  the  its  the  be  to  and  decline each  plotting  death  next  the  the  for  into  the  age-sex  over  time  paper to  estimate  highest  the  1980  rate  and  trend  factors.  forecast  rate  w h e r e  the  constant,  rate  has  assumed the  Caves  been  caused  is  an  at  groups,  traced  period  this  by  artificially  period.  against  T h e  is  g r o w s .  w h e r e a s  has  sex  rates  the  death  the  time out  on  for  effect  of  that  the  but  stands e m i -  the  fore-  this  method  rates  are  period.  mortality  rates  death  extend  to  extended  age  age  relatively  death  an  of  the  Commission  death the  in  population  Royal  that  historical  the  period  low  and  years  remains  forecast  divided  simply of  that  decline  50  effect, a s  maintained  plot  the  below  recent  immigrants  each  obtain  are  note  for  semi-logarithmic  T o make  a  to  cause  immigration  population is  to  decreasing  cannot  procedure  to  If  feels  young  With  cast  a  rate  study  influx  is  be  death  the  logarithmic  immigrants  interesting  Holton  a r d  tending  declining.  course  declining  and  most is  It  factor  age  rates  against  because become  for  the  bracket,  time  using zero  in  becomes  straight about  survivors the  it  of  number  linear fifteen  each of  necessary projections years.  cohort  persons  that  will  expressed  44. in t h o u s a n d s the p o w e r  in e a c h g i v e n a g e  of t h e n u m b e r  of y e a r s  the e s t i m a t e d m o r t a l i t y r a t e f o r  As groups,  not o n l y  Economy  young immigrants  E.  persons  i s l i k e l y to c o n t i n u e ,  i n that a g e  group.  death r a t e w o u l d  specific  but a j u d g e m e n t i s a l s o  neces-  death r a t e s w i l l  continue.  f a c t o r s a n d a s s u m i n g the  manpower  lie b e t w e e n  minus  decline  w i l l c o n t i n u e to r e q u i r e to m e e t  by  t h e r a t e of  t h e p a t t e r n of s p e c i f i c  In c o n s i d e r i n g t h e a b o v e  crude  multiplied  i n e a c h a g e g r o u p of o n e  i s it n e c e s s a r y to d e c i d e w h e t h e r  about w h e t h e r  Canadian  be  w i t h p o s s i b l e s u b j e c t i v e a d j u s t m e n t s of t h e a g e  in the c r u d e r a t e sary  and s e x c l a s s would  a substantial number  of  this study a s s u m e d  the  needs, 7 and  growing  8 between  1965  and  1980.  of  popula-  Immigration  The  immigration  rate  i s the m o s t v o l a t i l e c o m p o n e n t  tion g r o w t h  and greater  immigration  than e i t h e r the b i r t h r a t e o r  its s m a l l e r  absolute n u m b e r ,  gration forecast will cent e r r o r  Xhe  uncertainty s u r r o u n d s  however,  t h e f o r e c a s t of  the death r a t e . a 20  net  B e c a u s e of  percent e r r o r  i n the  a f f e c t the p o p u l a t i o n f o r e c a s t l e s s t h a n a 20  in the b i r t h  rate.  main factors r e s p o n s i b l e for  t h e h i g h v o l a t i l i t y of  the  miper-  45. immigration figures  1)  The  s e e m to  be:  e c o n o m i c c y c l e s of b o t h  Canada  c o u n t r i e s f r o m w h i c h the i m m i g r a n t s 2)  The  Political  The  with other  events and  r e a l w a g e s of  p o l i c i e s of C a n a d a  and other  in  1913.  r e a c h e d a l o w of Recently,  however,  1 immigration rate has  been  as  indicated b e l o w .  4. G R O S S  —  — — —  — —  —  IMMIGRATION 8,504 12,801 22,722 71,719 64 , 1 2 7 125,414 95,217 73,912 194,391 164,498 168,868  T O 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963  1 Canada  countries.  e f f e c t of t h e f a c t o r s o n t h e v o l a t i l i t y of i m m i g r a t i o n  1 9 4 2 a n d a h i g h of 4 0 0 , 0 0 0  1 943 1944 1945 1 946 1 947 1 948 1949 1950 1 951 1952 1 953  Canada  countries.  a p p r e c i a t e d b y t h e f a c t that i m m i g r a t i o n  T A B L E  the  come.  relative economic opportunities o r  compared 3)  a n d t h o s e of  Year  Book,  1965,  p.  206.  C A N A D A -  154,227 109,946 164,857 282,164 124,851 106,928 104,111 71,689 74,586 93,151  7,600 the  can  be  in gross  46. Over Canada 1.0  the p o s t - w a r  has been  large.  million emigrants.  accounted for  19.5  years, Por  This  m o v e m e n t of p e o p l e  example, estimated  2.24 1.24  p e r c e n t of t h e g r o w t h  in a n d out  of  million immigrants m i l l i o n net  and  immigration  in p o p u l a t i o n o v e r  those  1 years. It c a n a l s o b e s e e n f r o m t h e a b o v e i n f l o w of  immigrants  coincide with high  t a b l e , t h e p e r i o d s of  p e r i o d s of e c o n o m i c  large  develop-  ment .  The 1958-1961  1)  main factors given  upsurge  which The  Canada  got  the C a n a d i a n  e x i s t e n t but it h a s  1  the  m o s t of i t s  labour  been and  Book  for  the  countries  from  immigrants. s e l e c t i n g the i m m i g r a n t  h i m to i n t e g r a t e  into C a n a d i a n  with  business  force.  emigration figures for  1945-55  Year  follows:  increasing emphasis placed on  Accurate  tion for  as  Canada  i n t h e e c o n o m i e s of t h e E u r o p e a n  q u a l i f i c a t i o n s to p e r m i t or  1965  d e c l i n e in i m m i g r a t i o n w e r e  The  2)  in the  e s t i m a t e d by 1951-55  Canada  the R o y a l  periods  were  are  virtually  non-  C o m m i s s i o n that approximately  L o u i s P a r a i , I m m i g r a t i o n a n d E m i g r a t i o n of P r o f e s s i o n a l S k i l l e d M a n p o w e r d u r i n g the P o s t - W a r P e r i o d , 1 9 6 5 , p. 9 .  emigra-  50,000  and  and  60,000  States,  respectively.  but b y  The  In  1955 about  1963 this f i g u r e  most  important  h i g h v o l a t i l i t y of C a n a d a ' s  had  immigration  in e c o n o m i c o p p o r t u n i t y  a n d r a t e of  migration.  This  being on  d r o p p e d to  left f o r  the  has  e x p l a i n e d the  b e e n the h y p o t h y s i s  generally  determine  the  hypothysis w a s reviewed  t h e r e l a t i o n of  United  26,000.  f a c t o r w h i c h s e e m s to h a v e  differentials  the b a s i c w o r k  32,000  that  direction  by C l a r k  m i g r a t i o n a n d the  with  business  1 cycle.  G i v e n that m i g r a t i o n  economic opportunity cant b a r r i e r s  assumes,  however,  t h e d i s c u s s i o n of  c o n c e p t i o n about w h e t h e r  t h e a b s e n c e of a n y  in p a r t i c u l a r ,  i s a r e s u l t of o r  country's  national i n c o m e .  In m o s t  the national i n c o m e In g e n e r a l ,  if a r e a s o n a b l y however,  primarily  signifi-  in g e n e r a l ,  a c a u s e of  is some  as well  high  Canada's  by the a b s o r p t i v e  independent  pre-  as  i n c r e a s e s in t h e  p o p u l a t i o n f o r e c a s t s , the  i n c r e a s e i s c o n s i d e r e d to b e  in  persons.  potential i m m i g r a t i o n  population g r o w t h  migration  determined  p r i m a r i l y o n the d i f f e r e n t i a l  to t h e i n t e r n a t i o n a l m o v e m e n t of  Underlying  population  depends  natural  of the g r o w t h  l e v e l of e m p l o y m e n t a b i l i t y to a b s o r b c a p a c i t y of h e r  is  of  maintained.  immigrants  export  C o l i n C l a r k , T h e C o n d i t i o n s of E c o n o m i c P r o g r e s s , (London, 1951), Chapter iii.  2nd  is  industries  Ed.  48. and  the i n d u s t r i e s d e p e n d e n t  the e x p o r t most  industries  hazardous  migration  into  is largely  Canada  such,  simply r e v i e w rate for  or  to f o r m u l a t e  and for  Again Caves  and  30,000  1  R.  in  E.  both  the i m m i g r a n t s assumed  the i m m i g r a n t s  study  and w e r e  made  are  u s e d for  of t h e  im-  purpose-  migration  determined  and  the  and  the e m i g r a n t s  that t h e b i r t h  as for  forecasting,  and  natural  as follows: *  The  low immigration  and  R.  median  to d e c l i n e l i n e a r l y f r o m  H.  assumes  Holton,  a linear  The  for  the  fore-  in the f o r e c a s t ,  and  rate  assumed  will  population.  low,  net r a t e  is  a  death r a t e s  high,  the m e d i a n  Caves  seems  little a l t e r n a t i v e but to  to e s t i m a t e t h e p o s s i b l e v a r i a t i o n  1970;  it  that c o u l d  establish a "best guess"  specific groups  it i s a l s o  tion c o n s i d e r s the  magnitude  theory  i s left w i t h  distribution is generally  Holton  assumptions  any  the  prices,  period.  age-sex  to b e c o n s t a n t f o r  b e the s a m e  by w o r l d  of  immigration.  the p a s t d a t a a n d  constant a g e - s e x  cast period  determined  the f o r e c a s t e r  the f o r e c a s t  Where  B e c a u s e the p e r f o r m a n c e  to e x p r e s s f i r m v i e w s a b o u t  f u l l y b e u s e d to p r e d u c t  As  on them.  the  immigration rate  120,000  in  rate  assump1951  d e c l i n e to 4 0 , 0 0 0  Canadian  Economy,  to a  p. 274.  year of  in  1970;  range  year  the  Royal  between  50,000  report,  1965-70  an average  to  likely for  year  the  an average 75,000,  with a constant  1955-1980  E c o n o m i c G o a l s for  period,  depend  Canada's requirements  h e a v i l y o n the  for  immigrants  n i t u d e s of t h e i n c r e a s e s in n a t i o n a l  In t h e p r e s e n t 1980  in effect i s a g r e e i n g for  C a n a d a to  assumed 125,000,  r e s u l t i n g in a n a v e r a g e  c a n be s e e n f r o m the a b o v e  1 9 6 5 to  1970,  i m m i g r a t i o n of  examples,  annual  net  e s t i m a t e s of  im-  most r e c e n t e x p e r i e n c e  and  u p o n t h e j u d g e m e n t of t h e f o r e c a s t e r a s to w h a t  the  75,000  period.  C a n a d a to  gross  to  50,000.'  migration figures  for  low  e x p e c t e d t h e net i m m i g r a t i o n f i g u r e  100,000per  e m i g r a t i o n of  i m m i g r a t i o n of  As  Commission  b e i n g the most  The for  1970  50,000.  The  per  a n d t h e h i g h r a t e a s s u m e s t h e r a t e to hit a  1970  study,  i s l i k e l y to  as compared  to t h e l i k e l y  for  net  immigration  accepted a s being r e a s o n a b l e .  w i t h the outlook  presented  in the E c o n o m i c  a n d a s s u m e s the f o r c e s t e n d i n g to  E c o n o m i c C o u n c i l of C a n a d a , G o a l s f o r C a n a d a to 1 9 7 0 , p . 3 6 .  mag-  income.  a f i g u r e of 4 5 , 0 0 0  period w a s  be  First Annual  This Goals  decrease  Review,  Economic  50. immigration t h r o u g h to  F.  Future  in the C a v e s a n d  Figure  1.  b i r t h r a t e of 2 4 a n d a c r u d e  Canada's For  population a r e  comparative  and  T A B L E  Holton study a r e  per  below  death r a t e  year,  the  in T a b l e  future  5  and  t h e p o p u l a t i o n e s t i m a t e s of  the R o y a l  Commission  and  the  5  (in Present Study  E S T I M A T E S  thousands)  C a v e s tj Holton  E c o n o m i c G o a l s for C a n a d a to 1 9 7 0  Royal Commission 1  1965  19,600  19,430  1970  21,500  20,980  1975 1980  2  19,200  19,520  21,160  21,640  23,570  23,310  23,990  25,810  25,770  26,650  21,730  1 2  of  included.  P O P U L A T I O N  Year  shown  purposes,  t h e E c o n o m i c C o u n c i l of C a n a d a , Caves  operate  Estimates  a n d a s s u m i n g a net i m m i g r a t i o n of 4 5 , 0 0 0  e s t i m a t e s of  c o n t i n u e to  1980.  B a s e d on a crude 7.5  Holton study will  B a s e d on  annual  net i m m i g r a t i o n of  50,000  per  year.  B a s e d on  annual  net i m m i g r a t i o n of  75,000  per  year.  ?  O  P  U  L  P o P v j L A T T |o  Av~T V O  15,000,000'  "  _o.ooo.ooo  " "  \ 5,000,000  V O.ooo.ooo  •  5, o 00,000  \«=>AS  \ 9 S o  \ 3 ~ l O  \35S N-  FIGURE  I  -  P O P U L A T I O N  Av  VST  5  R  E S T I M A T E S  1965 - 1980  \ 9 B O  52. Concerning  t h e v a r i a b i l i t y of p o p u l a t i o n  r e c a l l e d that i n t h e C a v e s age  1)  specific female  High  Rate  and  population  -  Median 1960  Rate  3)  Low down  -  1960  Rate  -  to the  as  net i m m i g r a t i o n  The illustrated  used for  below.  1951  fertility rate w o u l d  decline by  1951  levels,  rate  would  continue  approximately  would  show  16  a steady  a total d e c r e a s e of  death r a t e s .  rates were  ranges  follows:  f e r t i l i t y r a t e of  B e c a u s e of t h e r e l a t i v e s t a b i l i t y of t h e estimation w a s  the  to  percent  1970.  the h i g h 1940  be  the f e r t i l i t y r a t e s f o r  assumed  1951  it w o u l d  and  study,  it m a y  1970.  the h i g h  after w h i c h  between  were  the c o n s t a n t h i g h  c o n t i n u e t h r o u g h to 2)  Holton  estimates,  assumed  of t h e a s s u m e d  The  32  mortality  high,  fertility and  percent.  rates,  median,  as previously  decline  and  a  low  discussed.  death  rates  point  are  T A B L E  6.  S A M P L E  Birth  BIRTH  Rates  AND  (20-24  IMMIGRATION  age  R A T E S  group)  188.7  159. 1  129.5 1951  1 960  Net  Immigration  1 970  Rates  120,000  50 , 0 0 0 40 ,000 30 , 0 0 0  1 970  1 951  A point  combination  estimates for  the  of b o t h  "high"  mortality  rates  estimates combined gives  a population  with  the  estimate  of  21,515,000; a n d the two  the c o m b i n a t i o n of b o t h "median"  b e t w e e n the high median  figure  and  and  was  probable, made  for  sumed, Holton  estimates give  20,984,000  for  l o w f i g u r e s a m o u n t to 3 . 8  2.6  In t h e R o y a l 50,000  rates give  "low"  percent  b e l o w the m e d i a n  Commission  study,  1970.  100,000  a s the u p p e r  both f e r t i l i t y a n d  however, study.  were  Ror  limit.  example,  higher  of  the  most  75,000  were  fertility r a t e s  age g r o u p ,  the  as  to a b o u t  shown  205  in  in T a b l e  1975,  median  212  t h a n the  in  figures  6.  With the R o y a l range  both c o n s i d e r a b l y h i g h e r  and  Royal  C o m m i s s i o n a s s u m e d the f e r t i l i t y f i g u r e s w o u l d d e c l i n e f r o m 1955  as-  t h a n t h o s e of t h e C a v e s  in the 2 0 - 2 4  the  figure  Point estimates The  spread  figure.  a net i m m i g r a t i o n  mortality r a t e s .  much  The  percent above  s e l e c t e d a s t h e l o w l i m i t of t h e r a n g e ,  and  20,190,000;  C o m m i s s i o n a s s u m p t i o n s about  indicated is f r o m minus  3.3  percent  to p l u s 3 . 8  immigration  the  p e r c e n t of  the  range.  The  above  percentages,  however,  cannot be taken a s  e s t i m a t e of t h e e x p e c t e d a c c u r a c y of a p o p u l a t i o n f o r e c a s t . t a k e s the s p r e a d  between  h i g h e s t of t h e h i g h s ,  l o w e s t of the t w o  the s p r e a d  becomes  If  low forecasts and  plus o r  minus  4.6  an one the percent.  55. It w o u l d t h e r e f o r e  appear  that it w o u l d  p o i n t e s t i m a t e to b e i n e r r o r  as  much  be quite p o s s i b l e for a s five p e r c e n t o r  any  possibly  more.  •  IV.  A.  L A B O U R  F O R C E  Introduction  D u r i n g the i m m e d i a t e participation has and a rapidly  past,  t h e p a t t e r n of  rising rate for  women.  Some  s e e m s to h a v e  the n u m b e r  prolonged  labour  of p e n s i o n  f o r c e after  two  i n the C a n a d i a n great  plans,  i n the n u m b e r  The  of w o m e n  of the  b e e n t h e i n c r e a s e in  school attendance and  remaining  in o r  re-entering  the  labour  e x p e c t e d to t a k e p l a c e  f o r c e w i t h i n the next fifteen y e a r s  will be  the  partici-r  women.  of p e o p l e  to "the E c o n o m i c G o a l s f o r in the 2 0 - 2 4  age group  33 p e r c e n t  between  percent  and  Whereas  between  age g r o u p  33.  1965  1975.  e n t e r i n g into t h e l a b o u r  Canada  to  i n the l a b o u r  p e c t e d to i n c r e a s e b y  Page  the  marriage.  m o s t s t r i k i n g f e a t u r e s that a r e  According number  men  contributing  i n f l u x of y o u n g p e o p l e a n d t h e c o n t i n u e d i n c r e a s e in t h e  pation by  above  force  b e e n a s l o w l y but s t e a d i l y d e c l i n i n g r a t e f o r  f a c t o r s to t h e s e d e v e l o p m e n t s  increase  labour  1965 a n d  1970,' force  1970  the n u m b e r  forces during  is  the ex-  and by  of the  57  m a l e s in the 1950«s  57. totalled 2 5 , 0 0 0 , w i l l a m o u n t to  The count for  B.  the  1960's,  this i n c r e a s e  270,000.  above  30  compared  it i s e x p e c t e d that d u r i n g  report  a l s o e x p e c t s that m a r r i e d  p e r c e n t of t h e w o m e n  with  10 p e r c e n t  in  i n the l a b o u r  women  f o r c e by  will 1970  acas  1950.  Methodology  Once derived,  a projection for  the p o p u l a t i o n e s t i m a t e s h a v e  it b e c o m e s a r a t h e r  been  s t r a i g h t f o r w a r d e x e r c i s e to e s t i m a t e  t h e s i z e of t h e f u t u r e  labour  force.  This  that t h e e s t i m a t e s a r e  without a d e g r e e  does  not m e a n ,  however,  of u n c e r t a i n t y a s a r e s u l t of  assumptions.  As  a natural follow-up  to a p o p u l a t i o n e s t i m a t e b a s e d o n  a n d s e x d i s t r i b u t i o n , a f o r e c a s t of t h e l a b o u r plying producted and each age  labour  force  is derived  before three  by  f o r c e p a r t i c i p a t i o n r a t e s s p e c i f i c to e a c h  apsex  class.  In a n e f f o r t to m a k e t h e f o r e c a s t a s a c c u r a t e a s several  age  possible,  d e d u c t i o n s f r o m the total p o p u l a t i o n f i g u r e s s h o u l d be calculating past and estimating future  m a i n d e d u c t i o n s that w o u l d  be  made  made  participation r a t e s . in C a n a d a ' s  case,  The  at l e a s t ,  58. would  1.  be:  Assuming  the a r m e d  and a constant age  f o r c e s to b e a l l m a l e ,  d i s t r i b u t i o n , the r e s u l t i n g f i g u r e s  b e s u b t r a c t e d f r o m the a p p r o p r i a t e 2.  3.  of a g i v e n  age  classes.  e s t i m a t e of I n d i a n s o n r e s e r v a t i o n s b y a g e a n d s e x  be  deducted.  An  e s t i m a t e of t h e p o p u l a t i o n as jail,  hospitals,  before  labour  etc. are  generally  a s s u m e d to b e  three  deductions,  f o r c e u s e d by the  the,  Bureau  of  y e a r s of a g e a n d o v e r  be i n c l u d e d in the l a b o u r  force.  Statistics,  the total  w o u l d b e e l i g i b l e to  t h e a s s u m p t i o n s a s to t h e p a r t i c i p a t i o n r a t e s a r e  in p r o j e c t i n g the l a b o u r  f o r c e , t h e r e c o r d of  rates  by age and s e x only  more  data b e c o m e s available and f i r m e r  accuracy  deducted  a n d by the o f f i c i a l d e f i -  of t h e p o p u l a t i o n f o u r t e e n  While  a  force figures are calculated.  With the a b o v e n i t i o n of t h e l a b o u r  would  by a g e a n d s e x in institutions  c o n s t a n t p e r c e n t a g e of t h e t o t a l p o p u l a t i o n a n d a r e  prove.  would  An  such  size  go  b a c k to  1945  labour for  trends  of t h e e x p e c t e d p a r t i c i p a t i o n r a t e s  may  crucial  force participation  Canada. become  Although apparent,  b e e x p e c t e d to  as the  im-  59. The  a c t u a l e s t i m a t e s of t h e p a r t i c i p a t i o n r a t e s a r e  much  the s a m e  rates,  namely  manner  and  a s to w h a t  In t h e p r e s e n t the s i z e of the l a b o u r in both t e c h n i q u e s , sacrificed is open  l i k e l y to o c c u r ,  study,  a simpler  i s the  most  in  prob-  method w a s  u s e d to e s t i m a t e  f o r c e but b e c a u s e of t h e u n c e r t a i n t i e s i n v o l v e d s e e m the d e g r e e  to q u e s t i o n .  to b e o u t l i n e d i s , of c o u r s e , no a g e  The  main  to w h i c h a c c u r a c y i s  d i s a d v a n t a g e of the  a s w i t h t h e s i m p l e m e t h o d of  s t r u c t u r e is obtained for  the  method  estimating  estimated  force.  This  simple  method,  the o n e  used  to c a l c u l a t e t h e a c t u a l p e r c e n t a g e of b o t h population trends,  some  much.  it w o u l d  the total p o p u l a t i o n ,  what  in  mortality  e x t e n t the p a s t t r e n d w i l l b e f o l l o w e d  if c h a n g e s a r e  able direction and h o w  labour  fertility r a t e s o r  a n a n a l y s i s of t h e p a s t e x p e r i e n c e a n d t h e n  "educated guess" the f u t u r e  a s d e r i v e d for  derived  making  some  up the l a b o u r  assumption w a s  force. made  r a t e s to b e e x p e c t e d i n t h e f u t u r e . in s u b s e q u e n t  in t h e p r e s e n t men  and w o m e n  Again  study,  was  of t h e t o t a l  b a s e d o n the  past  a s to t h e p o s s i b l e p a r t i c i p a t i o n A  more  detailed d i s c u s s i o n follows  s e c t i o n s a s the c a l c u l a t i o n s a n d e s t i m a t e s a r e  actually  made. Although  the t w o a b o v e  examples are  p o s s i b l y the two  extreme  60. choices  in b r e a k i n g  participation r a t e s ,  down any  the c h o i c e d e p e n d i n g  t h e p o p u l a t i o n to c a l c u l a t e a n d  n u m b e r of p o p u l a t i o n  estimate  break-downs  are  possible,  m a i n l y o n t h e d e s i r e d f o r m of t h e l a b o u r  force  forecast.  What f o l l o w s n o w , the p r e s e n t  study  then,  i s the m e t h o d  to o b t a i n t h e f u t u r e  labour  B e c a u s e of the a f o r e m e n t i o n e d labour  force during  the  lation i n c r e a s e d u r i n g labour  force during  population g r o w t h  C.  Women  the  the  during  1950's w h i c h w a s the  it i s e x p e c t e d that  l e s s t h a n t h e r a t e of  the the  1950's.  Force  in the  i n e s s e n c e , a f o r e c a s t of t h e c h a n g e s i n  sociolittle  than ' g u e s s w o r k .  In t h e light of t h e a p p a r e n t of w o m e n  a n d the l o n g - r u n  i n c r e a s e d opportunity  d r i f t of C a n a d i a n  d u p l i c a t e t h o s e of t h e U n i t e d S t a t e s , will  popu-  of  l o g i c a l v a l u e s a n d a t t i t u d e s of s o c i e t y , s u c h a f o r e c a s t c a n b e more  the  f a s t e r t h a n t h e r a t e of  p r e d i c t i n g t h e p a r t i c i p a t i o n r a t e of w o m e n  force requires  in  force estimates.  trends,  will g r o w  used  1960's a s c o m p a r e d with a growth  i n the L a b o u r  Because labour  1960's  and reasoning  c o n t i n u e to i n c r e a s e t h e i r  attitudes o r  for  employment  p a t t e r n s to  it w o u l d s e e m that C a n a d i a n  participation rate  in the w o r k  force.  women  The may  historical  men  and women  be s e e n f r o m the d a t a in T a b l e  If the r a t e of force  between  r a t e of w o m e n percent  in  and  would  1963  is extended  increase from  9.8  to  the  T A B L E  reviewing  12 p e r c e n t  force .  percent  the  in  in the  work  participation  1 9 6 3 to a b o u t  12.5  the A m e r i c a n  d a t a of T a b l e  8,  it i s s e e n  that  climbed significantly  level.  7  DISTRIBUTION  O F  CANADIAN  L A B O U R  L  Population  Year  of w o m e n  1980,  r e c e n t l y h a s t h e p a r t i c i p a t i o n r a t e of w o m e n  above  labour  7.  i n c r e a s e of t h e p e r c e n t a g e  1954  in t h e  1 980.  Upon only  p a t t e r n of  F O R C E  a b o u r  F o r  c e  (Millions)  Men 1 946 1 954 1 957 1960 1963  3.75 4.25 4.56 4 . 75 4,87  12.31 15.29 16.61 1 7.87 18.90  1  Canada  Year  Percent of Population  Book -  1965, p.  30.2 27.8 27.5 26.6 25.8  723-724.  Women 1 1 1 1 1  .08 .23 .43 .66 .85  Percent of Population 8.8 8.1 8.6 9.3 9.8  62. T A B L E  8  DISTRIBUTION WITH  Y E A R  PROJECTIONS  141 . 9 163.0 172.0 180.7 189.0  The  by  figures  American  1970  after  women  which  i n the l a b o u r  the p a s t ,  an  L A B O U R T O  L A B  Men 46.0  32.4  49.5 50.6  26.4 26.8 26.6 26.7 26. 7 26.6  8 also  2  O U R  F O R  it i s e x p e c t e d to l e v e l  continue  the p a r t i c i p a t i o n 14.7  percent  out.  to c o n v e r g e  United  E  11.5 12. 1 12.5 12.0 13.0 13.5 14.7 14.8 14.8  16.3 19.7 21 . 5 22.5 24. 7  i n p a r t i c i p a t i o n r a t e s of  force  C  Percent of Population  Women  i s e x p e c t e d to c l i m b to a b o u t  A b s t r a c t of t h e 6.  t  F O R C E  i n d i c a t e that  i n d i c a t e d p a r t i c i p a t i o n r a t e of  Statistical jected from P .  1980  Percent of Population  from Table  If the d i f f e r e n c e women  AMERICAN  POPULATION (Millions)  1946 1954 1957 1960 1963 1965 1 970 1975 1 980  r a t e of  OF  Canadian  at t h e s a m e  13 p e r c e n t  States -  and  1965,  would  p.  American  rates  as  result.  217,  Pro-  in It  63, would  s e e m a f a i r h y p o t h y s i s that in t h e light of the v e r y  p a t i o n r a t e of Q u e b e c n a t u r e of  Canadians  the l a b o u r  women  a n d the g e n e r a l l y  that C a n a d i a n w o m e n  will  more  low  partici-  conservative  not l i k e l y p a r t i c i p a t e .in  f o r c e to t h e e x t e n t of A m e r i c a n w o m e n  w i t h i n the  forecast  period.  The women  rates used  i n the l a b o u r  in t h i s s t u d y  force are  to e s t i m a t e the p a r t i c i p a t i o n of  given  below.  T A B I—EE 9 .  ESTIMATE CANADIAN  OF  WOMEN  IN  L A B O U R  T H E  F O R C E  Year  Estimated Population  1965  19.60  10.0  1,960,000  1970  21.50  10.9  2,340,000  1975  23.57  11.7  2,760,000  1980  25.81  12.5  3,230,000  It m a y  b e n o t e d i n p a s s i n g that t h e a b o v e  substantially higher Economic to 9 . 6  than those u s e d by  Prospects.  percent  Projected Participation  in  1980.  The  rates used  From  i s a d i s t i n c t l e v e l l i n g out o r  Table  the R o y a l  N u m b e r of W o m e n in L a b o u r Force  participation rates C o m m i s s i o n on  i n that r e p o r t 9,  are  Canada's  increased from  it c a n b e s e e n that u n l e s s  s l i g h t d e c l i n e in t h e r a t e s of t h e f u t u r e ,  817 there the  64. Royal  Commission  r a t e of w o m e n  D.  Men  will have  in the C a n a d i a n  i n the L a b o u r  The  Although at l e a s t  1954,  why  to b e  of a r a t h e r  in  men  has  the p r e s e n t evidence,  there  1965  seem, number  b e g i n to c o m e o n t o for  Also, does  participation rate  percent  large  perplexing  been  that t h i s c o n t i n u e d  not s e e m  the  in the of  The  possibly reached rate.  Although  logical  a low and will  it i s f a r  too  as  in  1963.  Table  reason  Royal  short 1964  face  Commission men  rising  1980.  experience and university  the C a n a d i a n  it i s i n t e r e s t i n g to n o t e that the  e x a c t l y the s a m e  in  school and  market,  decline  c o n t i n u e to d e c l i n e in t h e  light of A m e r i c a n  both high  labour  percent  take  steady  p r o j e c t i o n s of  to b e a n y  participation rate.  to 2 7 . 6  will  declining rather  if t h e A m e r i c a n  should  men  problem.  a n i n c r e a s e in the p a r t i c i p a t i o n r a t e s f o r  It w o u l d ions and  a rather  seem obvious  stable A m e r i c a n  actually f o r e s a w 27.1  presents  indefinitely.  the C a n a d i a n  from  Force  it w o u l d  correct,  participation  force.  the p a r t i c i p a t i o n r a t e s h a v e  c o u l d not go o n 8 prove  work  the  d i r e c t i o n w i t h w h i c h the p a r t i c i p a t i o n r a t e f o r  in the next fifteen y e a r s  since  substantially underestimated  project-  graduates  participation  possibly stabilize a period  rate  around  to b e t a k e n  participation rate  as  was  65.  It w i l l  be assumed  i n t h i s s t u d y that t h e p a r t i c i p a t i o n r a t e  t e n d to s t a b i l i z e a r o u n d t h e p r e s e n t  level a s is s h o w n  in T a b l e  will  10  below. T A B  LEE:  10  E S T I M A T E  O F M E N  IN T H E  CANADIAN  L A B O U R  F O R C E  Projected Participation  Estimated Population (Millions)  Year  N u m b e r of M e n In L a b o u r F o r c e  1965  19.60  25.8  5,050,000  1 970  21  .50  26.0  5,600,000  1975  23.57  26. 1  6, 1 5 0 , 0 0 0  1980  25.81  26.2  6,760,000  It m a y b e n o t e d at t h i s p o i n t that t h e f i g u r e s and  10 a r e f o r the civilian w o r k  and w o m e n E.  in T a b l e  9  f o r c e a n d d o not i n c l u d e t h e m e n  in the a r m e d  forces.  Conclusions and Comments The  to  employed  both  table b e l o w then  i s the resultant  1 9 8 0 a n d includes the estimates made  The  estimates a r e also s h o w n  in F i g u r e  estimated w o r k  by the R o y a l  f o r c e up  Commission.'  2.  W. C . H o o d a n d A . Scott; Output, the C a n a d i a n E c o n o m y , 1 9 5 7 , P . 1 8 5 .  Labour  a n d Capital in  \_/\e»OOR  PORCE  _ S T \ V\  _S  LABOUR.  T OHO _ \o  0 0 0 , 0 0 0  _,ooo,ooo  G.000,000 -^,000,000  2..Q 0 0 , 0 0 0  \9^5  FIGURE  2  19SO  -  \ 9 5 5  L A B O U R  \9<bO  F O R C E  \3foS  l 9 1 o  E S T I M A T E S  \ 9 1 5  \ 3 & 0  1965- 1980  67. Por  comparative  purposes,  e s t i m a t e d by the C a v e s a n d Economic Caves  G o a l s for  Canada  and Holten study  c o n s i d e r i n g the w o r k their  estimate for  T A B L E  H o l t e n s t u d y to b e to  1970  will  1964  force  was  1970 and  by  Although  breakdown  of t h e i r  6,920,000,  be c o n s i d e r a b l y  in  7,230,000  to 7 , 8 8 3 , 0 0 0 .  d i d not g i v e a n y  f o r c e in  1970  the total w o r k  was the  the figures,  it w o u l d  seem  low.  1 1  T O T A L  ESTIMATED  WORK  F O R C E  (Thousands!  Present Study  Royal  Year  Men  Women  Total  Men  1965  5 ,050  1 ,960  7,010  1970  5,600  2,340  1975  6 , 150  1980  6,760  Because ant o n  Women  Total  5,290  1 ,690  6,980  7,940  5,940  1 ,970  7,910  2 , 760  8,910  6,640  2,260  8,900  3,230  9,990  7,380  2,550  9,930  t h e e s t i m a t e s of t h e l a b o u r  the p o p u l a t i o n e s t i m a t e s t o g e t h e r  participation r a t e s ,  Assuming  Commission  it m i g h t  Immigration  force are  directly  w i t h the e s t i m a t e s f o r  dependthe  b e e x p e c t e d that t h e v a r i a b i l i t y of t h e  to b e  75,000  per  year.  labour  force would plus o r  b e at l e a s t e q u a l to that of t h e p o p u l a t i o n e s t i m a t e s  minus  five  Cumulative to b e too  great  that a n o v e r some  percent.  errors  in t h e p a r t i c i p a t i o n r a t e s w o u l d  a problem,  estimate in o n e  however,  however,  b e c a u s e it m i g h t  group would  extent by a n u n d e r e s t i m a t e  denying,  or  that e r r o r s  be  not  seem  expected  l i k e l y b e a c c o m p a n i e d to  in a n o t h e r  c a n be made  group.  This  is  not  in e s t i m a t i n g p a r t i c i p a t -  i n g r a t e s w i t h o u t it a f f e c t i n g t h e a c c u r a c y of the l a b o u r  force  forecast.  69. V.  A.  O U T P U T  Methodology N a t i o n a l output h a s  measure may  of t h e w e l f a r e of  be taken a s  ment,  and  Conceptually,  1.  The  The  measured  v a l u e of  The  by  an  production index  or  users"  and  accurate  in national capacity,  output employ-  total e c o n o m i c a c t i v i t y c a n  economy  during  a  a period  in m o n e t a r y of g o o d s  in  units. and  services  con-  period.  during  i n the n a t i o n a l - i n c o m e measure  the p e r i o d  in  incomequestion.  accounting scheme  may  of total e c o n o m i c a c t i v i t y  and  s h a l l b e p r o d u c t i o n of v a l u e d g o o d s as such,  expressed  a c c r u i n g to a l l i n d i v i d u a l s a n d  e n t i t i e s in a n e c o n o m y  be  ways:  output f o r  number or  b e e x p r e s s e d a s the " c o n t r o l l i n g  end  changes  in p r o d u c t i o n  in t h e f o l l o w i n g t h r e e  pivotal axiom  accomplishment  as a relatively  earnings.  total of a l l i n c o m e s  receiving  The  a nation b e c a u s e  v a l u e of the total c o n s u m p t i o n  sumed 3.  regarded  national output o r  the f o r m of a n 2.  been  i n d i c a t i v e of c h a n g e s  consumption  defined o r  long  r e s u l t s i n t h e a d o p t i o n of  and  services  production  or  for output  a s the key concept of economic activity.  1  T h e adoption of output as the key to economic activity and recalling the determinants of productive capacity enunciated by Domar in Chapter II, most of which were concerned with quantity and quality of input factors, would seem to indicate long-term economic forecasting should concentrate on output estimates, rather than some of the other possibilities to be mentioned shortly.  Following then the procedure indicated by the implication s for forecasting, again estimation of output becomes the key economic variable.  With output defined as the total quantity of goods and  services produced during a given time period expressed in current p r i c e s , an accurate analysis would attempt to segregate the c o n t r i b u tions of each of the main contributors, land.  However,  namely, labour,  capital, and  since the author knows of no study that has made  such an analysis and observed the change in the contributions of each factor to changes in total productivity,  it seems the forecaster  must be satisfied with assuming most of the productivity uted to labour.  T h i s trend,  can be attrib-  in effect, is to consider that the ratio of  total output to labour moves in a time pattern similar to that being described by the assumed ratio of total output to the sum of all the factors of production.  P . Lewis, 1959, P . 18. 1  J.  Business C o n d i t i o n s A n a l y s i s ,  McGraw-Hill,  71 . The  common  approach  of t a k i n g t h e a v a i l a b l e l a b o u r  estimating its d i v i s i o n b e t w e e n economy  and  applying  able,  the  v a l u e of  measurement  goods  of o u t p u t a n d  changes  services produced Although  such  a large  records  indices are other  going  of u s i n g  independence  independent  of  measure  product  of  materials,  number  changes  of e s t i m a t e d f u t u r e  rents,  by  and  fuel,  and  industries,  adjustments dividends  similar  essentially  The  seem  actual  product. domestic  such factors  and  The  index does  domestic  for  the  estimates.  r e l i a b l e e s t i m a t e of g r o s s  net f l o w of  their  level.  i s that  profit  of o u t p u t .  output i s the g r o s s  making  all  the i n d i c e s a r e  business  the  power,  industries with  the i n d u s t r i a l p r o d u c t i o n  a reasonably  best  between  in t h e p r i c e  of p r i c e l e v e l c h a n g e s ,  c a n be d e r i v e d  of  avail-  B e c a u s e the w e i g h t s of  t h e b e s t of the p o s s i b l e m e a s u r e s  indirect taxes,  in o u t p u t s e e m s  s u c h an industrial p r i c e index  not p e r f e c t ,  these figures,  a  total o u t p u t a r e  not a v a i l a b l e f o r  1935.  depreciation adjustments  Although to p r o v i d e  b a c k to  essentially independent  advantages  to t h e i r  From  available for  in C a n a d a  the  requires  the d i f f e r e n c e  and  a n d the s e r v i c e s p u r c h a s e d . indices are  s e c t o r s of  figures  a l t e r n a t i v e s to m e a s u r e  industrial index based on  and  main  and  output.  various  effected using an  three  the e s t i m a t e d p r o d u c t i v i t y  c a r e f u l a n a l y s i s of total  Although  the two o r  force  interest.  as  72. Although  the a b o v e  approach  at l e a s t c o n c e p t u a l l y , o t h e r feasible.  The  based on  of p r o d u c t i o n uses  employed  s i d e of t h e  problem  under  monetary  and  and would  interest on government  activities s u c h a s imputed w a g e s  A  are  debt, and  etc.  ically,  main In the  of n a t i o n a l  salaries,  in-  income  some  the  v a l u e d at  as non  imputed  current  p l a c e d i n the n a t i o n a l i n c o m e a c c o u n t s .  second problem  a r e a with this a p p r o a c h  i s that  to n a t i o n a l i n c o m e c a n not a l w a y s b e n e a t l y s e g m e n t e d various  The  But  is  the  excluded such  etc.  are  which  b e the total of  o n the p a r t i c u l a r m e a s u r e k i n d s of p a y m e n t s  seem  of t h e f a c t o r s  i s to w h a t to c o u n t a s i n c o m e .  depending  p r i c e s and  approach  Product account.  v a l u e of o w n e r - o c c u p i e d h o m e s ,  market  common,  output w o u l d  a l l i n d u s t r i e s of the r e w a r d s  National Income  payments,  the m o s t  National Income  i n that i n d u s t r y  consideration, various  transfer  rental  for  with this a p p r o a c h  come approach,  by far  m e t h o d s of d e t e r m i n i n g  f i r s t of t h e s e i s the  the a g g r e g a t i o n  seems  i n d u s t r i e s a n d that a l t h o u g h income generated  by  the. output m a y  productive activity  may  contributions  between  be p r o d u c e d partly  the domest-  b e p a i d to  foreigners.  Another method,  problem  area,  although  not e n t i r e l y u n i q u e  to t h i s  i s that i n d u s t r i a l c o n t r i b u t i o n s to n a t i o n a l i n c o m e a r e  i n t e r m s of c u r r e n t  income,  s o u r c e s of  it w o u l d b e  income,  a n d b e c a u s e of the v a s t a r r a y most  of  expressed different  d i f f i c u l t to d e f l a t e s u c h a s e r i e s of  73.  income figures.  A third possible alternative to measuring total output is the summation of value added by industrial sectors measured at current cost.  A problem h e r e ,  as in the above c a s e ,  is that generally while  a fine break-down is available for some parts of the economy,  there  are industrial sectors of the economy with no break-down at all. A l s o the problem exists of trying to construct a deflator index for such a series;  the problem arising from the fact that the value added  figures include such diverse components as a complex of incomes, depreciation and payment for other business  services.  T h e above problems discussed in the contributions to national income and value added approaches to measuring total output, would seem to present even more serious problems and possibilities of inaccuracies if used to estimate future outputs.  Possibly the greatest  problem areas would be the estimation of the imputed incomes and the changing structure of the classification of the industries for purposes of estimating value-added and contributing incomes of the various  sectors.  Besides the method of correlating the estimated labour force with total output, one other method that correlates changes  in product1  ivity with changes in gross national product was used by Raushenbush. T h e rational of the study is based on the supposition that when output ':S. Raushenbush; Productivity and Employment 1955-1965; Public Affairs Institute, Washington, D . C . , 1956.  per for  man-hour labour  uct  man-year  to p r o d u c e  total n u m b e r will  or  i n c r e a s e s , there  any one  of u n i t s w i l l  u n i t of o u t p u t  then  per  unit of  crease 1.0  in t h e U n i t e d S t a t e s b e t w e e n  in g r o s s  national product  p e r c e n t that o u t p u t  study  used this method  per was  amounted  man-year  but b e c a u s e t h e a t t e m p t w a s  product  independent  employment  of the l a b o u r  figures for  Having  o n the p r o d u c t i v i t y a n d discussion  B.  D i v i s i o n of  increased.  made  Canada  productRor  percent for The  every  reason  it w a s  in-  this  more  to e s t i m a t e g r o s s  ac_  national  possible  un-  forecast.  s i z e of t h e f u t u r e  for  prod-  the r e a l  that t h e e s t i m a t i o n of f u t u r e  d e a l s with this method  to e s t i m a t e t h e o u t p u t  1.2  f o r c e to d e t e r m i n e  the p e r i o d of  decided then,  1955,  not n e c e s s a r i l y b e c a u s e  curate,  the  increased  and  to  the  "labour"  for  national p r o d u c t . 1950  for  time.  l e a d s to a r e l a t i o n s h i p b e t w e e n  i v i t y a n d the i n c r e a s e i n the r e a l g r o s s example,  for  that t h e i n c r e a s e i n d e m a n d  e x c e e d s t h e i n c r e a s e in o u t p u t  demand  but that d e m a n d  i n c r e a s e a n d that t h e d e m a n d  i n c r e a s e by the a m o u n t  This  is a d e c r e a s e d  labour  in g r e a t e r u p to  force,  detail and  output  the  is  based  subsequent  u s e s this  method  1980.  Output  In a t t e m p t i n g to d r a w  up a f o r e c a s t for  t h e total p r o d u c t i v i t y of  75. the e c o n o m y separate  as  studies w e r e  slightly different  The between  measured  the g r o s s  reviewed.  methods  Caves  by  and  domestic product,  E a c h of the t h r e e  in c a l c u l a t i n g the g r o s s  Holten  the a g r i c u l t u r a l a n d  study  simply  e s t i m a t e d t h e r a t e of c h a n g e of e m p l o y m e n t of t h e t w o  components  The above on  study  a per  farm  main r e a s o n s  for  a n d the o t h e r s  man  year  average.  at a g r o s s  separating  other  force  and  labour  components productivity  domestic product  out a g r i c u l t u r e of  productivity  is above  force and  in  each figure.  in both  the  productivity  i s l e s s t h a n half of t h e  in a g r i c u l t u r e  used  product.  p o i n t s of s i g n i f i c a n c e i s that t h e  employed  i n c r e a s e of  domestic  i s that t h e a b s o l u t e f i g u r e  b a s i s of f a r m e r s  Two  of t h e total l a b o u r t h e i r r a t e of  to a r r i v e  studies  d i v i d e d the  the n o n - a g r i c u l t u r a l  three  nonproportion  is declining and  also  that of t h e n a t i o n a l  aver-  age.  The-  two other  studies reviewed... -  the R o y a l  Commission^  and  2 the D r a b b l e  Study  further  d i v i d e d the n o n - a g r i c u l t u r a l  W . C . H o o d and A . S c o t t : Canadian Economy, 1957.  Output,  Labour  and  component  C a p i t a l in  into  the  2 B. J . Drabble: P o t e n t i a l O u t p u t 1 9 4 6 to 1 9 7 0 ; S t a f f 2 p r e p a r e d f o r the E c o n o m i c C o u n c i l of C a n a d a , 1964.  Study  No.  76. a Government  and Community  s e r v i c e s section and a B u s i n e s s  or  Commercial section.  The format on  as used  the o t h e r  Because study,  Royal  Commission  i n the C a v e s  hand,  s t u d y f o l l o w e d in e s s e n c e the  and  approached  Holten study.  the p r o b l e m  it w a s the l a t t e r a p p r o a c h  it w i l l  be briefly outlined  The  somewhat  that w a s  labour  1970  and  divided by  the g o v e r n m e n t a n d  this section w a s derived  residual  present  study  e s t i m a t e d total  man.  community  s e c t i o n , total output  for  a g a i n e s t i m a t e d ' a n d a n e s t i m a t e of t h e o u t p u t p e r  total e m p l o y m e n t  figure  differently.  the e s t i m a t e d a g r i c u l t u r a l  to c a l c u l a t e t h e p o t e n t i a l e m p l o y m e n t  The  study,  below.  f o r c e to o b t a i n t h e p r o d u c t i v i t y p e r  Por  Drabble  f o l l o w e d in the  In t h e a g r i c u l t u r a l s e c t i o n , t h e D r a b b l e a g r i c u l t u r a l o u t p u t to  same  in this s e c t i o n .  in the C o m m e r c i a l  f r o m the a b o v e  man  two s e c t i o n s .  s e c t i o n w a s then  This  figure  was  a  further  d i v i d e d into p a i d w o r k e r s a n d s e l f - e m p l o y e d o r  unpaid w o r k e r s .  number  a productivity figure  of p a i d w o r k e r s w a s  then multiplied by  The  o b t a i n t h e total o u t p u t i n t h i s s e c t i o n .  In t h e l a s t t w o the D r a b b l e  study,  studies mentioned,  the R o y a l C o m m i s s i o n  the m a i n r e a s o n s g i v e n f o r  s e p a r a t i n g out  the  and  to  77. government and s e r v i c e s e c t o r is b e c a u s e been  increasing rapidly  b e c a u s e the a b s o l u t e  t e n d s to b e  low.  clear  but a s e m p l o y m e n t  trend  tance,  The  and  changes over  its impact o n o v e r - a l l  The  remaining  s e c t i o n i s by f a r  the  time  l e v e l of  in p r o d u c t i v i t y  in this s e c t o r g r o w s measures  productivity  s e c t i o n , that of t h e  business or  important  about  70  and  rate  accounted for  has  productivity show  in r e l a t i v e  of  most  c e n t of t h e o u t p u t a n d  the e m p l o y m e n t  no impor-  increases.  commercial about  80  p e r c e n t of t h e t o t a l e m p l o y m e n t  perin  1963.  Two  major  assumptions  s t u d i e s a n d the p r e s e n t p a t t e r n of and  aggregate  second,  study  made  is first,  the a p p r o p r i a t e  t h e c o m p o s i t i o n of t h e r e q u i r e d  inputs a r e  Some  mentioned level  to a b s o r b  l e v e l of  that u n d e r l i e  and  the o u t p u t  demand will  the w a y  in  studies have  s e p a r a t e d out  labour  a n d t o t a l o u t p u t but  s t u d i e s u s e o n l y output p e r  which  man  and  capital  b e c a u s e of  as an o v e r - a l l  components  simplicity  measure  of  General As  mentioned  earlier,  the a g r i c u l t u r e  section has a  most  productivity.  Agriculture 1.  not  combined.  to e s t i m a t e p r o d u c t i v i t y  C  a l l the a b o v e  d e m a n d c a n be generated  be i n c o n s i s t e n t w i t h the a s s u m p t i o n s the v a r i o u s  by  low  78.  productivity  but that p r o d u c t i v i t y  per  man  is increasing relatively  rapidly.  The  main factors which  t e n d to b e  t h e a g r i c u l t u r a l s e c t i o n s e e m to b e a s  a)  increased  b)  higher draw  in  follows:  mechanization.  earnings off  increasing productivity  outside  the a g r i c u l t u r a l s e c t i o n t e n d i n g  marginal  labour  leaving a more  towards  larger  and  to  efficient c o r e  of  workers. c)  the t r e n d  d)  the b e t t e r valued  The gain  two  main  factors which are  i n the a g r i c u l t u r e  the c o n s i d e r a b l e U.S.  surplus  productive  b)  barring  any  the h i s t o r i c g r o w t h  for  farms.  and raising  higher  much  better  t e n d i n g to o f f s e t t h e  s e c t i o n s e e m to  of  of t r a d e  U.S.  for  wheat  rate for  in t h e  major  and  the  little  im-  farm  pro-  failures. agriculture  harvests on  latter y e a r s  w h i c h the s t a t i s t i c s a r e  in s t o r a g e  s e e m s to g i v e  the C a n a d i a n  because  above  be:  Canada's  drastic harvest  ivity i s b i a s e d u p w a r d been  drainage  c a p a c i t y of w h e a t  p r o v e m e n t in t e r m s duct,  efficient  products.  in p r o d u c t i v i t y  a}  u s e of f e r t i l i z e r s ,  more  available.  than  product-  the a v e r a g e  in t h e e a r l i e r  have ones  79.  It w o u l d s e e m ,  however,  in the light of post w a r  experience  the f a c t o r s tending to i n c r e a s e producitivity have far outweighed tending to hold back productivity e v e n though the two offsetting have  2.  not a l w a y s  been of constant  those forces  magnitude.  Employment  L o o k i n g first at employment in the a g r i c u l t u r a l  sector,  of decline in f a r m employment h a s been somewhat s p o r a t i c in the T a b l e  the  as  rate  shown  below:  T A B L E 12  R A T E S  OF  DECLINE  Average 1928  Annual  IN  Percentage  1928  to  1946  to  1946  FARM  to  EMPLOYMENT Change 1956  to  1956  1956  1963  -.03  - I ; 7  - 4 . 1  - 2 . 7  The  trend in a g r i c u l t u r e  employment is d e t e r m i n e d to a  extent by s u c h f a c t o r s a s v a r i a t i o n s in the f a r m s e c t o r  B.  J.  and the g e n e r a l  Drabble,  P. 7 9 .  1  in the input of capital o r  large  machinery  level of employment in the r e s t of  80. the e c o n o m y . an  Canada,  as  in m o s t  countries,  t e n d s to  e l e m e n t of d i s g u i s e d u n e m p l o y m e n t i n t h e a g r i c u l t u r e  pecially  periods  in p e r i o d s  of h i g h  unemployment  experience section,  i n t h e r e s t of  esthe  e c o no m y .  It i s b e l i e v e d that a s u b s t a n t i a l a m o u n t of d i s g u i s e d ment p e r s i s t e d until the e a r l y rapid  farm  mechanization  employment  between  "The  study  agricultural  employment  rate which  corresponds  a trend  curve  Xhe force  to  due  the  more  Royal  In t h e would period; period.  appear 1.75%  this c o m b i n e d  with  d e c l i n e in  farm  1956.  2 percent  a c o n s t a n t r a t e of d e c l i n e for  the  1963-1970  in  period,  a  c l o s e l y to t h e r a t e of d e c l i n e at the e n d  also recognized  but s u g g e s t e d pursuits  intensive  feasible for the  the d e c l i n i n g  of  dimin-  growing  to  farming.  factors,  the f o l l o w i n g r a t e s of  the a g r i c u l t u r a l s e c t i o n ;  1970-75  labour  that the r a t e of d e c l i n e w o u l d  t e n d i n g to s w i t c h f r o m g r a i n  livestock  light of t h e a b o v e  for  and  to e x p l a i n the r a p i d  assumed  Commission  to a g r i c u l t u r e labour  of  and  period  1963.  in a g r i c u l t u r e  ish  seems  1946  Drabble  postwar  unemploy-  period;  and  -  1.5% for  2% f o r the  decline  1964-1970  1975-1980  81 . U s i n g the a b o v e force w a s would  624,000  be a s  mission and  T A B L E  in  f i g u r e s then and  1964,  the l a b o u r  i n d i c a t e d in T a b l e Drabble  13.  studies a r e  c o n s i d e r i n g the f a r m  force  The  labour  in a g r i c u l t u r e to  1980  e s t i m a t e of the R o y a l  included for  Com-  comparison.  13  ESTIMATED  Vear  L A B O U R  Present  F O R C E  Study  IN  Royal  A G R I C U L T U R E  Commission  Drabble  1965  618,000  760,000  601,000  1970  556,000  744,000  543,000  1975  507,000  742,000  1980  470,000  735,000  As  c a n be s e e n f r o m  t e n d e d to v i e w t h e a n d that r a t e s of run  3.  World War  Output  Agriculture  and  in  Table,  the R o y a l  r a t e s of d e c l i n e a s b e i n g  decline would follow m o r e  period before  The 1946  1946-1956  the a b o v e  substantially above  temporary long  II.  i n c r e a s e d at a r a t e of a b o u t the  very  c l o s e l y t h o s e of t h e  o v e r a l l i n c r e a s e in a g r i c u l t u r a l o u t p u t  1963 h a s  Commission  long r u n  i n c r e a s e of  .7  in C a n a d a  1.5  percent.  percent  between This  is  e x p e r i e n c e d in  82. the  1928-1956  experienced  period  i n the  Annual the d e g r e e weather  variations  conditions, Xhe  moving  immediate  about  above  relevance  (2.6  percent)  period.  in f a r m output a r e  wide,  on such r a n d o m and  rates are  major  yearly  to the  primarily  exogenous  factors  as  grain-growing  regions  of  output.  fluctuations  Also, in g r a i n  l e v e l of e m p l o y m e n t  utilization in the e c o n o m y  a s a r e s u l t of c o r r e s p o n d i n g  reflecting  t h e r e s u l t s t h e n of u s i n g  of a c t u a l f a r m  the w i d e  l e v e l of r e s o u r c e  the s u b s t a n t i a l i n c r e a s e s  e s p e c i a l l y in the  averages  output a n a l y s i s , no  1946-1956  of d e p e n d e n c e  the c o u n t r y . year  but b e l o w  or  i n t h e c o n t e x t of harvests  have  to t h e  general  b e c a u s e they  changes  seven  do  in t h e v o l u m e  not  come  of f a c t o r  in-  puts .  In e s t i m a t i n g t h e t o t a l o u t p u t i n the high mainly  the  term  rates.  Xhe  1955-1980  1.5  percent  per  Royal  p e r i o d of  Commission .97  percent,  the year  Drabble would  experience  foresaw a figure  study  assumed  continue, better  a r a t e of  than  the  increase  just a b o v e  the  long-  rate.  In the much  of  b e c a u s e t h i s r a t e f i t t e d the p o s t - w a r  long-run for  r a t e of g r o w t h  1970,  lower  light of o u r  long-term  output adopted  most  rates,  by this study  recent experience  t h e r a t e s of are:  1.5  but c o n s i d e r i n g  i n c r e a s e s in total  percent  u p to  1970,  the  agriculture  1.25  percent  for  the  1970-1975  period,  and  1.0  percent  for  the  1975-1980  period. This  assumes  t h e r e s u l t s of w h i c h  TABLE:  a gradual  are  given  trend  b a c k to t h e  in T a b l e  long-run  rates,  14.  14  ESTIMATED  T O T A L  A G R I C U L T U R A L  ( M i l l i o n s of  Year  Present  1949  O U T P U T  Dollars)  Study  Royal  Commission  1965  2.269  2.280  1970  2.444  2.500  1975  2.602  2.710  1980  2.735  2.910  4.  Productivity  By of  combining  productivity  can  in  Agriculture  t h e r e s u l t s of T a b l e s be  derived.  This  is  13 a n d  14,  shown  in  an  estimate  Table  15  84, below:  T A B L E  15.  O U T P U T  P E R  M A N - Y E A R (1949  Year  Present  Study  IN  A G R I C U L T U R E  Dollars)  Royal  Commission  Drabble  1965  3,680  3,000  3,770  1970  4,400  3,360  4,500  1975  5,130  3,660  1980  5,820  3,960  The amounts  average  to 3 p e r c e n t  w i t h the R o y a l ween  1955  1980. between 1946  and  and  1963.  B.  1970  also  1928  for  i n c r e a s e in p r o d u c t i v i t y  the  Commission  and  This  r a t e of  1965-1980  assumption  and a 2.5  compares 1956  a n d the  5.2  This  of a 3 p e r c e n t  percent  with 2.4  period.  per  compares increase  increase between  percent percent  actually  man  1970  betand  experienced  experienced  between  1  J . Drabble;  Potential Output,  1 9 4 6 to  1970,  P.  78.  85. D.  Government  Unlike Administration  and  Public  the D r a b b l e and  study  Community  a t e f o r e c a s t s of p r o d u c t i v i t y was  felt f o r  area,  Administration  this study,  that d i v i d e d t h i s s e c t i o n into  s e r v i c e s components  a n d total output  c o n s i d e r i n g the  for  many  and  or  Xhe given  below  T A B L E  undivided  u n c e r t a i n t i e s in t h i s by  using  used  in this s e c t i o n  are  16.  O U T P U T ,  G O V E R N M E N T  E M P L O Y M E N T AND  PUBLIC  AND  PRODUCTIVITY  ADMINISTRATION  Average  Annual  1 928 to 1 946  1928 to 1956  Percentage 1946 to 1956  Change 1956 to 1 963  G.D.P.  +4.1  +3.8  +3.3  +3.8  Employment  +4.4  +4.0  +3.3  +5.7  -  -  Output  it  16  HISTORICAL IN  separ-  data.  s i g n i f i c a n t s t a t i s t i c s that a r e in X a b l e  made  each component,  that s u f f i c i e n t l y a c c u r a t e r e s u l t s c o u l d b e o b t a i n e d  grouped  Public  per  man  .3  .2  0  -1 .8  86. The  Drabble  i n the t o t a l o u t p u t  study  foresaw  of t h i s s e c t o r  an annual  between  Commission  e s t i m a t e d the o v e r a l l a n n u a l  1980  percent  at 2 . 9  It w o u l d in total output 1963  period,  line for  the  for  government  s e e m that  percent  a figure  of 3 . 8  year  T A B L E  and  administration  would  and  in this s e c t o r , be a s  1955  r a t e of  not a p p e a r of  for  the  too f a r  3.8  percent  r a t e of - . 5  output  i n d i c a t e d in T a b l e  17.  O U T P U T ,  PRODUCTIVITY  and  increase 1946 out  to  of  to  percent  the total o u t p u t ,  would  Royal  services.  percent  U s i n g the f i g u r e  employment  IN  T H E  PUBLIC  G O V E R N M E N T  ADMINISTRATION  T o t a l Output ( M i l l i o n s 1949 d o l l a r s ) 2,660 2,860 3,430 4 , 130 4 ,950  1 963 1 965 1970 1 975 1 980  This 120,000.  percent  The  percent  for  per  17  ESTIMATED  Year  1970.  increase between  and allowing; a modest  the d e c l i n e in p r o d u c t i v i t y man  and  a n d a r a t e of 3 . 5  period.  c a l c u l a t e the total output  1963  i n t h e light of t h e l o n g t e r m  of 3 . 8  1965-1980  i n c r e a s e of 4 . 3  i n c l u d e s the a r m e d  AND  E M P L O Y M E N T  AND T O  1980  Output p e r M a n - Y e a r (1949 Dollars)  Employment  2,244 2,220 2 , 170 2,110 2,060  forces which amounts  1,290,060  1,580 ,000 1,960,000 2,400,000  to  approximately  87. The  reason  the d e c l i n e i n p r o d u c t i v i t y i n t h i s s e c t i o n c a n n o t  b e e x p l a i n e d e a s i l y but s u g g e s t i o n s put f o r w a r d  b y the D r a b b l e  i n d i c a t e that t h e i n c r e a s e d u s e of p a r t - t i m e w o r k e r s , t h e r a t i o of  l e s s s k i l l e d to p r o f e s s i o n a l e m p l o y e e s  and changes  in the " m i x "  study  the i n c r e a s e in  in c e r t a i n a r e a s ,  of i n d i v i d u a l s e r v i c e s m a y  indicate partial  explanations.  The  Royal  ivity t h r o u g h proved  EE.  the  t h i s to b e  Commercial  1.  Commission  1955-1980  period,  but s o f a r  experience has  productnot  correct.  Non-Agricultural  Introduction  As  mentioned  section as  agricultural  this by  approximately  far 80  i s the m o s t  important  p e r c e n t of t h e o u t p u t  and  employment.  It s h o u l d b e  that u s e d  previously,  it a c c o u n t s f o r  70 p e r c e n t of t h e  study  e x p e c t e d a slight i n c r e a s e in  n o t e d that t h e d e f i n i t i o n of t h e c o m m e r c i a l  s e c t o r for  the p u r p o s e s  by the D o m i n i o n  Bureau  of  of t h i s s t u d y  is l e s s r i g o r o u s  Statistics classification.  it i s u s e d to i n c l u d e a l l n o n - f a r m s e c t o r s o t h e r  ministration and community  services.  nonthan  In t h i s  than public  ad-  88. 2.  Employment  To  o b t a i n the total e m p l o y m e n t  residual from for  t h e total a v a i l a b l e f o r c e a f t e r  the e x p e c t e d l a b o u r  public administration added  120,000  120,000  ment  and  was  force  in a g r i c u l t u r e  calculated.  to a l l o w f o r  public  The  T A B L E  force  but w a s  To  the a r m e d  i s the c e i l i n g s e t by  total l a b o u r  e x p e c t e d in this s e c t o r ,  this r e s i d u a l figure This  and w a s  not  figure  and  was of  i n c l u d e d in the  in c a l c u l a t i n g the output  of  govern-  administration.  table b e l o w  i s the  net r e s u l t of t h e a b o v e  calculations.  18  ESTIMATED  L A B O U R  F O R C E  IN  N O N - A G R I C U L T U R A L Vear  estimates  a n d the g o v e r n m e n t  forces.  parliament  included  d e d u c t i n g the  the  Present  Study  COMMERCIAL  S E C T O R  Royal  Commission  Drabble  1965  5,222,000  5,090,000  5,100,000  1970  5,924,000  5,850,000  5,800,000  1975  6,563,000  6,660,000  1980  7,240,000  7,460,000  89. This commercial the of  w o u l d i n d i c a t e a r a t e of g r o w t h labour  1928-1963 2.5  Economic  As  G o a l s for  slightly higher  2.3  percent  f o r c e a n d w o u l d s e e m to c o m p a r e  r a t e of g r o w t h  percent.  of  of  2.2  indicated by Canada  during  to  the l a t e  p e r c e n t a n d the  both the D r a b b l e  1970,  in the  favourably  with  1946-1963  period  study and  the  t h e r a t e of i n c r e a s e w i l l  1960's and  may  be a s high  be  as 3.2  per-  cent . ' 2 A was or  procedure  that w a s  followed by  both  Drabble  and  to s e p a r a t e o u t f r o m t o t a l c o m m e r c i a l n o n - a g r i c u l t u r a l  unpaid  family w o r k e r s .  procedure  "The r e a s o n s  i s that t h e s e l f - e m p l o y e d a n d  in the n o n - a g r i c u l t u r a l  labour  It i s ,  productivity in o t h e r  of d i s g u i s e d  words,  unpaid w o r k e r s  1948  b e l o w the a v e r a g e  g r o u p of of p a i d  highly  workers workers.  l i k e a g r i c u l t u r e that c o n t a i n s a n  and  1955,  element  the p e r c e n t a g e of s e l f e m p l o y e d  d e c l i n e d f r o m about  it h a s r e m a i n e d  B.  an a r e a  larger  c o r e of  group  unemployment.  Between  where  unpaid family w o r k e r s  and a much  level is much  employment  following this  f o r c e c o n s i s t s of a h a r d  productive and skilled persons whose  given for  Denison  16.5  e s s e n t i a l l y to t h e  J . Drabble,  P.  p e r c e n t to a b o u t  12  and  percent  present.  79.  E . R . D e n i s o n : " I m p r o v e d A l l o c a t i o n of L a b o u r a s a S o u r c e of H i g h e r E u r o p e a n G r o w t h R a t e s " , f o r t h c o m i n g f r o m the B r o w n U n i versity P r e s s .  90. The  Drabble  from  its p r e s e n t  1980  it w o u l d  study  a s s u m e d that t h i s p e r c e n t a g e w o u l d  12 p e r c e n t  in  1970.  i n d i c a t e a f i g u r e of  i n d i c a t e d r a p i d r i s e in the l a b o u r into t h e e x p a n d i n g as  economy,  If t h i s r a t e w a s  8.5  percent.  force  this figure  If,  e x t e n d e d to  however,  i s not a d e q u a t e l y may  drop  the  absorbed  not d r o p a s s i g n i f i c a n t l y ,  expected.  It i s not s t a t e d in t h e D r a b b l e cent w a s  chosen and  influencing these  no  indication w a s  why  t h e f i g u r e of  g i v e n a s to w h a t  may  10  it w a s felt the r a p i d  be  i n c r e a s e in t h e  f o r c e w o u l d t e n d to r e t a r d t h e r a t e of d e c l i n e ,  past f o r c e s w o u l d b a s i s t h e n that t h e  c o n t i n u e to o p e r a t e . 10 p e r c e n t f i g u r e  It  but that t h e  w a s assumed on  would  this  not b e r e a c h e d u n t i l  W i t h t h e s e a s s u m p t i o n s t h e n t h e s i z e of the p a i d w o r k e r s labour  force would  T A B L E  be a s  indicated b e l o w .  19 PAID-WORKERS  COMMERCIAL Year 1965 1970 1975 1980  per-  rates.  In the light of t h i s t h e n , labour  study  L A B O U R  F O R C E  N O N - A G R I C U L T U R A L Labour  IN S E C T O R Force  4,600,000 5,240,000 5,860,000 6,520,000  1980.  or  91 , 3.  Productivity and Total  To  e s t i m a t e the t o t a l o u t p u t  as followed hours  of  Output  in t h e  input  Drabble  was  study  in t h i s s e c t i o n , the s a m e  was  used.  The  method  e s t i m a t e d total  m u l t i p l i e d b y the e s t i m a t e d p r o d u c t i v i t y  per  man  man-  hour .  Upon worked found  per  examining  a curve  worker  per  week  that t h e c u r v e  has  been  sistently.  If t h i s c u r v e  same  rate as  week  would  T A B L E  during  the  number  past twenty  f a l l i n g at a d i m i n i s h i n g  is extended,  in the p a s t ,  be a s  fitted to t h e a v e r a g e  of  years,  it i s  rate rather  w i t h the s l o p e d i m i n i s h i n g  the n u m b e r  of h o u r s  i n d i c a t e d in T a b l e  hours  worked  per  at  conthe  worker  20.'  20  ESTIMATED  H O U R S  WORKED  N O N - A G R I C U L T U R A L  Year  Hours Per  1965 1970 1975 1980  Worked Week  38.4 37.6 37.0 36.5  ^The curve used of the D r a b b l e Study. 2  IN  COMMERCIAL  S E C T O R  Hours Per  Worked Year  Total Man-Hour Input 2  2,000 1,955 1,925 1,900  for  this estimate is C h a r t  9,200,000 10,250,000 11,300,000 12,400,000  6 found  on  Page  T o o b t a i n t h e total m a n hour i n p u t , t h e h o u r s w o r k e d p e r m a n y e a r w e r e m u l t i p l i e d by the e s t i m a t e d l a b o u r f o r c e in this s e c t i o n a s indicated by T a b l e 19.  28  92. The worked  estimate for  is probably  estimate for  the  the p r o d u c t i v i t y i n c r e a s e p e r most  important  man  hour  f a c t o r w h i c h w i l l affect the  the t o t a l o u t p u t i n t h i s s e c t i o n .  Although  this figure  has  i n c r e a s e d at a n a v e r a g e  annual  rate  1 of  2.4  percent  ly e v e n l y o v e r slow  down  between time.  p r e s s u r e s of The  b e of  which are  Drabble  it h a s  not i n c r e a s e d  perfector  in the i n t e n s i t y of r e s o u r c e u t i l i z a -  a s s o c i a t e d in t u r n w i t h the  s t u d y u s e d a r a t e of  rates experienced during  f i g u r e of 2 . 4  i n t e r e s t to n o t e ,  crease omy  to c h a n g e s  p e r i o d of t h i s s t u d y ,  servative  1963,  changing  demand.  slightly higher longer  and  It s e e m s that p r o d u c t i v i t y t e n d s to i n c r e a s e  in r e s p o n s e  t i o n in t h e e c o n o m y  1946  in output p e r  however,  percent would also,  2.5  the  last f e w  in the U n i t e d S t a t e s d u r i n g  for the  b e c a u s e of  years.  be  more  appropriate.  annual  a l m o s t the s a m e 1947-1963  the  Ror  it w a s felt that t h e m o r e  that t h e a v e r a g e  man-hour  percent  It  percentage a r e a of the  period w a s also  the  conmay inecon2.4  percent. The increase  Royal  at a r a t e  1  Drabble,  C o m m i s s i o n felt that o u t p u t p e r between  P.  30.  2.5  percent and 3.25  man-hour percent.  would The  Caves  93. and  Holten study w a s a w a r e  too h i g h u p to  m a i n l y o n the g r o u n d s of p r e - w a r  1955.  average figure  of t h i s e s t i m a t e but felt it w a s  The  Caves  and  i n c r e a s e w o u l d be  which appears  Of  two other  and R e s o u r c e s '  for  e x p e r i e n c e a n d the  2 percent  between  1955  and  1970,  a  low.  A m e r i c a n s t u d i e s that h a v e  the  trends  H o l t e n s t u d y t h e m s e l v e s e s t i m a t e d the  to b e too  e s t i m a t e d i n c r e a s e in t h e  definitely  man-hour 1950-1960  output m a d e period w a s  been  made,  the  by A m e r i c a ' s 2.3  percent  Needs  whereas  2 the  Paley  1950-1975  Commission  e s t i m a t e d the f i g u r e  percent for  the  period.  U s i n g then the f i g u r e increase  to b e 2 . 5  in p e r  man  hour  of  2.4  p e r c e n t a s the e s t i m a t e d  productivity,  the p r o d u c t i v i t y p e r  annual  man  hour  a n d t h e t o t a l o u t p u t i n the c o m m e r c i a l n o n - a g r i c u l t u r a l s e c t i o n w o u l d 3 b e a s i n d i c a t e d in T a b l e 21 .  ' j . R . Dewhurst and A s s o c i a t e s , R e s o u r c e s , 1955, P . 4 2 .  America's Needs  and  2  United States President's Materials Policy C o m m i s s i o n , R e s o u r c e s f o r R r e e d o m , 1 9 5 2 , V o l . 1, P . 7, a n d V o l . 2 , P .  112.  3 T o t a l o u t p u t b e i n g t h e p r o d u c t of t h e o u t p u t p e r t h e total h o u r s w o r k e d a s e s t i m a t e d b y T a b l e 2 0 .  man  hour  and  94, T A B L E  21  ESTIMATED O U T P U T  IN  PRODUCTIVITY COMMERCIAL  P E R  M A N  AND  N O N - A G R I C U L T U R A L  Productivity P e r Man H o u r (1949 D o l l a r s )  Year  HOUR  T O T A L S E C T O R  Total ( B i l l i o n s of  Output 1949 D o l l a r s )  1965  2.831  26.00  1970  3 . 188  32.70  1975  3.588  40.60  1 980  4.039  50.20  Table was  22 then i s a s u m m a r y  u s e d a s a b a s i s in e s t i m a t i n g the f u t u r e Por  comparative  e x p e c t e d in e m p l o y m e n t , the p r e s e n t  study and for  purposes, gross  Table  gross  periods  s e c t o r s that  national  products.  2 3 s h o w s r a t e s of  domestic product  various  study.  changes  a n d p r o d u c t i v i t y of  taken from  the  Drabble  —•  The  r a t e s of  a n d t h e total g r o s s  i n c r e a s e estimated for  domestic product  past e x p e r i e n c e and c u r r e n t man  of t h e c o m p o n e n t  in the total e c o n o m y ,  trends.  however,  both the total  employment  s e e m to b e f a i r l y w e l l i n l i n e w i t h The may  estimated productivity prove  to b e s l i g h t l y  per  low.  95. It w o u l d  seem  r e s u l t of c u m u l a t i v e total p r o d u c t i v i t y line. vices  Ror  .5  sector  estimates biased  rather  example,  sector was  r a t e of  percent  the total p r o d u c t i v i t y based on  It w a s  would  low for years  2.5  percent  would  an  in the d i r e c t i o n to  i s the  under-estimate  i n the g o v e r n m e n t a n d than  ser-  non-agricultural  than the a s s u m e d  2.4  percent, 1.9  that r a t h e r  than changing  any  one  or  l e a d i n g to t h e c a l c u l a t i o n s of t o t a l p r o d u c t i v i t y , 1.9  but to b e a r  percent  figure  i n m i n d that it m a y  in light of the prove  e s t i m a t e of the i n c r e a s e i n p r o d u c t i v i t y most  the  assumptions.  however,  i n light of t h e  of  d e c l i n i n g at  i n the c o m m e r c i a l  rather  public  i n c r e a s e at t h e r a t e of a p p r o x i m a t e l y  s u f f i c e to a c c e p t t h e  past e x p e r i e n c e  total p r o d u c t i v i t y  to b e c o n s t a n t r a t h e r  productivity  present  felt,  of t h e a s s u m p t i o n s  if p r o d u c t i v i t y  and  for  t h a n a s i n g l e e s t i m a t e that i s s t r o n g l y o u t  assumed  p r o v e d to b e  percent  that t h i s l o w f i g u r e  recent  experience.  for  to b e the  long  all it run  slightly  next  fifteen  96. TABLE 22  S U M M A R Y  O F C O M P O N E N T S  :MPLOYMENT  AND  OUTPUT  Agriculture Employment  O F  (thousands)  (@ f a c t o r c o s t , b i l l i o n s 1949 $ ) I n d e x of G . D . P . Growth  1965  1 970  1975  1980  618  556  507  470  2.27 1 .00  2.44 1 .08  G . D . P .  Government  and Public Administration  Employment (thousands)' G . D . P . (©factor c o s t , b i l l i o n s 1949 $ ) I n d e x of G . D . P . Growth Commercial  1,290 2.86 1 .00  1 , 5 8 01,960  2,400  4 . 13 1 .44  4.95 1 .73  3.43 1 .20  Non-Agriculture  Employment (thousands) G . D . P . (©factor c o s t , b i l l i o n s 1949 $ ) I n d e x of G . D . P . Growth Total  2.60 2 . 7 4 1.15 1.21  5,222  5,924  6,563  7,240  26.00 1 .00  32.70 1 .26  40.60 1 .56  50.20 1 .93  7,010  7,940  8,910  9,990  31.13 1 .00  38.57 1 .24  47.33 1 .52  57.89 1 .85  Economy  Employment (thousands G . D . P . (©factor c o s t , b i l l i o n s 1949 $ ) I n d e x of G . D . P . Growth  1I n c l u d e s  120,000  f o r the a r m e d  f o r c e s not i n c l u d e d i n t o t a l .  97. T A B L E  23  COMPARATIVE I N C R E A S E S  IN  A V E R A G E  A N N U A L  E M P L O Y M E N T ,  PRODUCTIVITY  ROR  Present  P E R C E N T A G E  T O T A L  T H E  O U T P U T  T O T A L  AND  E C O N O M Y  Study  Drabble  Study  1965 to 1980  1928 to 1956  1946 to 1963  1963 to 1970  Employment  2.4  1.5  1.8  3.0  Total  4.2  3.4  4.1  5.5  1.9  1.9  2.3  2.4  G.D.P.  Productivity  F.  Man  Conversion  To gross  of O u t p u t  convert  to G r o s s  National  t h e e s t i m a t e of t h e g r o s s  national product  figures,  reference  Product  domestic product  was  made  to  to t h e c h a r t  or  2 outline  in the H o o d  'Drabble,  and  P.  Scott  study.  77  2 W. C . H o o d and A . S c o t t ; Output, the C a n a d i a n E c o n o m y , 1957, P . 194.  Labour  and  Capital  in  98. Here factor  it i s s e e n that to o b t a i n g r o s s  c o s t it i s n e c e s s a r y  paid o r  imputed  to a d d  to o w n e r s  this p r o p e r t y .  To  ect t a x e s l e s s g o v e r n m e n t a l product  at m a r k e t  dend  payments  and  explicit, has  erage  of t h e  From  rent  depreciation associated with t h e t o t a l of g o v e r n m e n t  this figure  national product  paid  E x c e p t for  is added  of  to r e a l  s u b s i d i e s to o b t a i n t h e g r o s s  prices.  to o b t a i n the g r o s s  product  in a n a m o u n t e q u a l  including any  this figure  domestic  figure  domestic  t h e n a l l that i s  i s to a d d  indir-  necessary  interest and  divi-  abroad.  the d e p r e s s i o n averaged  1946-1955  a c c e p t e d to c o m p u t e  very  period.  years,  total r e n t  c l o s e to 4 . 1 For  the e s t i m a t e f o r  p a i d both  percent,  this r e a s o n ,  implicit  the a c t u a l  this figure  the total r e n t  av-  was  correction. 1  From  the t a b u l a t e d d a t a d a t i n g  indirect taxes less subsidies has of the g r o s s  domestic product  made  in t h e H o o d  study  that t h i s a v e r a g e For  whereas  for  the the  Hood  and  proportion  1956-1963  Scott,  period, period  P.  1926,  222.  t h e t o t a l of  a relatively constant  at f a c t o r c o s t a n d  Scott study,  1946-1955  and  been  b a c k to  it w a s would  like the  assumed  hold for  this p r o p o r t i o n the a v e r a g e  proportion  assumption  in the  present  the f o r e c a s t was  the  12.7  i n c r e a s e d to  period. percent, 14.0  99. percent. have  Upon  been  reviewing  periods  this data,  of u p to t e n y e a r s  subsidies expressed as a percent been  approximately  Assuming erage  this will  r a t e of  13.3  14 p e r c e n t  percent  The  about  1,100  Royal  300  Because matters gross were  the  net  and  have  Commission  it i s v e r y  because  they  1980  and  Scott,  products  have  d i d not  persist.  case then,  an  av-  study.  dividend  growing  and  payments  constantly  that g r o s s  made  since  inflow w o u l d  to  am-  1980.'  d i f f i c u l t to b e v e r y  p r e c i s e about  these  a m o u n t to s u c h a s m a l l f r a c t i o n of the t o t a l  and  are  P.  used  by  indicated  1 Hood  rate  less  e x p e c t e d g r o s s o u t f l o w s to a m o u n t  the f i g u r e s  in this s t u d y  domestic  in t h i s  been  million d o l l a r s by  national p r o d u c t , used  used  there  the i n d i r e c t t a x e s  present  interest and  million d o l l a r s by  o u n t to a b o u t  of g r o s s  it i s s e e n that  but that t h i s h i g h  was  the a b s o l u t e f i g u r e s  1945.  where  b e t h e s i t u a t i o n in t h e  In c o n s i d e r i n g abroad,  however,  223.  the H o o d below.  and  Scott  study  100. T A B L E  24  E S T I M A T E D ON  I N T E R E S T  AND  INTERNATIONAL  DIVIDEND  P A Y M E N T S  A C C O U N T  1  Year  Net  1965  ,$575,000,000  1970  675,000,000  1975  750,000,000  1980  800,000,000  Using summary  the f i g u r e s a n d  methodology  Outflow  outlined above then,  of the c a l c u l a t i o n s to c o n v e r t t h e g r o s s d o m e s t i c  to g r o s s n a t i o n a l p r o d u c t f i g u r e s a r e and projected values a r e  given below.  i l l u s t r a t e d in R i g u r e  The  a  product  historic  3.  1 A s m e n t i o n e d in a footnote o n p a g e 2 2 3 , the H o o d a n d S c o t t s t u d y m a d e no a t t e m p t to d e f l a t e t h e s e f i g u r e s a s no g e n e r a l l y s a t i s f a c t o r y w a y of d e f l a t i n g s u c h a s e r i e s i s k n o w n .  FIGURE  3.  G R O S S  NATIONAL.  P R O D U C T  E S T I M A T E S  1965 -  1980  102. T A B L E  25  CONVERSION T Q (All  figures  Year  QF  G R O S S  i n b i l l i o n s of  31.13 38.57 47.33 57.89  DOMESTIC  NATIONAL 1949  1 .28 1 .58 1 .94 2.37  Table  Holton study  1980  i n c r e a s e in g r o s s  25 w o u l d be 4 . 2 6  Royal  a  r a t e of  l o w of 3 . 5  The  percent  G . D . P . Market Prices 36.72 45.49 55.82 68.28  Estimated G r o s s National P r o d u c t  Royal Oommission Estimates  3 6 . 15 44.82 55.07 67.48  31 . 4 38.9 47.2 57.0  national product  Between  1955 a n d  e x p e c t e d t h e r a t e to b e 4 . 0 range  previously)  4.31 5.34 6.55 8.02  e x p e c t e d t h e i n c r e a s e to b e 3 . 8  Commission period.  percent.  noted  Indirect Taxes Less Subsidies  32.41 4 0 . 15 49.27 60.26  .57 .67 .75 .80  The  and  P R O D U C T  G . D . P . @ Factor Cost  N e t O u t f l o w of I n t e r e s t and Dividend Payments 1965 1 970 1975 1980  P R O D U C T  dollars except w h e r e  Residential Rents  G . D . P .  1965 1 970 1975 1980  G R O S S  of e s t i m a t e s that w e r e  as shown  in  1970,  Caves  the  percent w h e r e a s  percent for  the  1955-  encountered w e r e  e s t i m a t e d b y the R e s o u r c e s f o r  Freedom  the  from  study  to  2 a h i g h of 5 . 1  1 sector o  p e r c e n t e x p e c t e d by  Van  der  Valk.  B a s e d o n 2 . 5 c o m p o u r i d r a t e of i n c r e a s e in p r o d u c t i v i t y of a n d net i m m i g r a t i o n of 7 5 , 0 0 0 p e r y e a r ,  R . E . C a v e s and R . H . Holton, U n i v e r s i t y P r e s s , 1961, p. 3 0 4 .  The  Canadian  Economy,  business  Harvard  103. It w o u l d s e e m t h e n that a n e s t i m a t e of 4 . 2 6 annual with  growth  postwar  by o t h e r s  rate for  Canada's  experience and  v i e w i n g this  gross  percent as  national product  is w i t h i n the g e n e r a l r a n g e  problem.  the  is compatible a s forecast-  VI.  A.  CAPITAL-  A C C U M U L A T I O N  Introduction With e s t i m a t e s m a d e  expenditures,  it r e m a i n s  for  the total output o r  to e x a m i n e  how  to b e d i v i d e d b e t w e e n t h e f i n a l d e m a n d  The investment ture  four  procedure  of t h e m e t h o d o l o g y  and some  might r e s u l t f r o m s u c h  B .  components.  s e c t o r s of d e m a n d ,  i n t h i s s e c t i o n i s to r e v i e w  are  expendi-  the m e t h o d o l o g y  appear  the  used  to b e t h e m a i n  general in t h e i r  weaknesses  of t h e p o s s i b l e s o u r c e s of e r r o r s  which  methodology.  the f o r e c a s t i n g of a l m o s t a n y  b y a n a n a l y s i s of p a s t d a t a ,  and pertinent  expected  trade.  e s t i m a t i o n a n d to i d e n t i f y w h a t w o u l d  ceded  be  capital accumulation, government  w i t h the a n a l y s i s of o t h e r  Since  t h i s output m a y  national  c a t e g o r i e s of d e m a n d to b e c o n s i d e r e d  expenditure or  and foreign  As  main  gross  past t r e n d s  economic variable is  such a procedure  identified w h e r e  is followed  prehere  possible.  M e t h o do lo g v  There  appears  to b e t h r e e  main  methods  to e s t i m a t e the  future  105. c a p i t a l a c c u m u l a t i o n that m a y All  the  methods,  however,  the f o r e c a s t s m a d e the g r o s s  national  The not  for  ation figure  for  fortunate  run  one  s t o c k of  uses  This  multiplying  would  stock.  possible  methods.  but The  investment  figure  the e x p e c t e d a n n u a l  be obtained  by a d d i n g  national product  increase  b a c k the  investdepreci-  e s t i m a t e to  obtain  estimate.  this method,  may  be  it i s f o u n d that d e p r e c i a t i o n investment  expected.  accounts  It w o u l d  seem  c o n s i s t s of a f a i r l y s t a b l e p o r t i o n of expected,  e x p e c t o u t p u t to b e a f a i r l y  capital and  the g r o s s  for  b y t h e c a p i t a l o u t p u t r a t i o to o;btain net  t h e n that d e p r e c i a t i o n  would  on  the e s t i m a t e s  d e s i r e d to o b t a i n a n  half t h e e s t i m a t e d g r o s s  national p r o d u c t .  another  ratio.  s u b t r a c t e d f r o m the g r o s s  net n a t i o n a l p r o d u c t  almost  indicated by  or  d i s c u s s e d t e n d s to b e f a i r l y s i m p l e  this m e a n s  investment  When one  way  i s to m u l t i p l y t h e e x p e c t e d i n c r e a s e s in t o t a l  net n a t i o n a l p r o d u c t Gross  in o n e  l e s s a c c u r a t e than other  it i s g e n e r a l l y  a specific year,  ments.  the  to b e  the e s t i m a t e d c a p i t a l o u t p u t  Because  in the  dependent  total output a s  first method  e s s e n c e of t h i s m e t h o d  for  are  economy.  product.  n e c e s s a r i l y any  output by  be e x p e c t e d in a g r o w i n g  however,  s i n c e in t h e  c o n s t a n t f u n c t i o n of  d e p r e c i a t i o n to b e a r e a s o n a b l e  gross  long  gross  stable function  of  106. T h e the  Royal  only  second  Commission  the  essential  T h e stock  method  of  and  in  will  consists  each  be  reviewed  since  features  method  capital  to  it  be  of  is  a  presented  by  the  rather  building  industry  w a s  up  means  method  used  sophisticated  by  method,  here.  a  model  of  for  estimating  estimating  the  the  current  1 additions,  the  both  or  plant  Having put  the  ratios  industrial  rising  that  to  be  assets,  and  current  machinery  and  equipment  domestic and  then  product  machinery totalled  the  since  the the  years  separating  capital  capital  rising.  slightly  dollar  for  the  In  the  World  estimates yearly  Discards the  and  reason  w h e r e a s  estimate  asset  and  construction  is  With to  the  to  "discards"  figures,  and  sections.  the  equipment  obtain  the  for  capital  out-  sectors  aggregate  w e r e  capital  ratio.  equipment  tends  of  gross  separately  T h e  falling  life  construction  for  calculated output  average  being  previously,  value  output  output  ratios  ratios  aggregate, War  for  net  construction  gross  to  constant  representative  for  machinery  construction machinery  h o w e v e r ,  the  and  tends  and ratio  to  be  equipment has  been  II.  additions  equal  for  and  of  domestic to  the  the  stock  investment  dollars the  product,  being  physical  of  the  capital,  made used  the  model  investment  life  of  throughout  quantity  of  used  capital  the to  make stock.  107.  expenditures  are  increases  population  in  F o r by  multiplying  ween this  a  the was  n  mechanically  given the  and  year  years  the  be  n,  expected  n-1  added  can  c a l c u l a t e d in  much  the  same  way  as  the  calculated.  the  increase  increase by  the  "discards"  in  in the  net  gross  forecasted  or  investment national  capital output  replacement  needs  was  obtained  product ratio  to o b t a i n  betand  the  to  gross  investment.  Net the  gross  gross  investment  investment  s t o c k of  section. investment  The  added  n-1  the  Formulated,  the  above  Net  N  =  Stock  =  n  N  by  capital  previous  +  l  by  subtracting  Depreciation  would  N -1  obtained  divided  s t o c k of to  then  figures.  year net  was  the in  estimated  service  year  year's  was  n  depreciation  l i f e of  would  s t o c k of  the  then  capital.  -  G  ^~*  Where: N l  n  n  <3 L_  n  =  Net  s t o c k of  =  Investment  =  Gross  =  Service  capital  in  expenditure  stock  in  l i f e of  year the  year in  n  year  n  assets.  n  equal  assets  equal  be:  n  to  the  from the  in  the  net  108. Again  the c r u c i a l  elements  investment expenditures a r e  the e x p e c t e d g r o s s  the c a p i t a l output r a t i o t o g e t h e r  Although assets  penditures represented life.  the p u r c h a s e of  the e x p e c t e d  a s s u m e d that i n v e s t m e n t  ex-  investment  given  F o l l o w i n g f r o m this a s s u m p t i o n ,  goods  it m u s t  with a  be a s s u m e d  t h e s e r v i c e l i v e s of a l l the k i n d s of a s s e t s in e a c h i n d u s t r y represented each  by  industry  of a s s e t s . ures  and  annual  a single figure  proportions  S i n c e the s e r v i c e l i f e a s s u m e d d e p r e c i a t i o n , a s pointed out,  of e a c h of t h e  that  be by  main  kinds  a f f e c t s the d e p r e c i a t i o n  accounts for  the s i m p l i f y i n g a s s u m p t i o n s a r e  t h e m e t h o d of d e t e r m i n i n g  can  a n d that t h e a n n u a l e x p e n d i t u r e s  contain unchanging  investment,  and  life of the a s s e t s .  not e n t i r e l y c o r r e c t i n d e t e r m i n i n g it w a s  forecasting  national output  w i t h the a s s u m e d  life w i t h i n e a c h i n d u s t r y ,  service  in t h i s m e t h o d of  a large  fig-  portion  of  n e c e s s a r y to a l l o w  the c a p i t a l s t o c k in e a c h i n d u s t r y  to  be  workable.  Another stock  possible method  for  determining  the d e t e r m i n a n t s of y e a r  lar  in c a p i t a l  i s to a t t e m p t to r e l a t e v a r i o u s e c o n o m i c v a r i a b l e s of t h e  s i d e to t h e l e v e l of c e r t a i n t y p e s of i n v e s t m e n t s .  are  the g r o w t h  to y e a r  not n e c e s s a r i l y t h e s a m e growth  changes  It m a y  i n t h e l e v e l of  a s the l o n g - r u n  be  demand  noted  investments  d e t e r m i n a n t s of i t s  a n d that the c o n s i d e r a t i o n s p r e s e n t e d h e r e  that  are  those  secuthat  109. apply  in the l o n g - r u n  rather  If the t o t a l i n v e s t m e n t inventory  accumulation,  than the  short-run.  demand  i s c a t e g o r i z e d into c o n s t r u c t i o n ,  investment for  machinery  n o n - r e s i d e n t i a l c o n s t r u c t i o n , the f i r s t t h r e e to v a r i o u s  economic variables.  The  and equipment,  and  c a n be r e l a t e d f a i r l y w e l l  fourth,  however,  is  somewhat  d i f f i c u l t to e x p l a i n .  It w a s f o u n d i n the C a v e s a n d H o l t o n s t u d y ' c o n s t r u c t i o n t e n d s to h a v e business cycle and the g r o s s  a c y c l e of  its o w n  that r e s i d e n t i a l  quite independent  i s f a i r l y w e l l c o r r e l a t e d w i t h the l o n g - r u n  national product  a n d t h e r a t e of  population  of  trend  c l o s e l y t i e d to t h e g r o s s  Investment very  in m a c h i n e r y  c l o s e r e l a t i o n s h i p to t h e  s e e n that t h e " m a r g i n a l  and equipment  l e v e l of g r o s s  propensity  and equipment  for  product.  1 Studies.  national  Chapter  4,  have  in the  long  tend run.  also exhibited a  national p r o d u c t .  to i n v e s t " a p p r o a c h  to f o r e c a s t m a c h i n e r y the g r o s s  national product  of  growth.  Inventory accumulation, a s with depreciation a l l o w a n c e s , to b e v e r y  the  c o u l d be  It i s used  i n v e s t m e n t g i v e n the e s t i m a t e s  S t r u c t u r e of t h e C a n a d i a n  Economy:  Statistical  110. Unlike  the a b o v e  investment  c a t e g o r i e s , the  non-residential  c o n s t r u c t i o n c a t e g o r y w h i c h w o u l d include f a c t o r i e s , institutional construction,  transportation systems,  to e x p l a i n a n d  does  national p r o d u c t , as has been  dams,  etc.  i s the  most  not s e e m to b e w e l l c o r r e l a t e d w i t h t h e  population g r o w t h  or  difficult gross  to t h e l e v e l of C a n a d i a n  thought.  Briefly,  the m e t h o d  u s e d to o b t a i n a n e s t i m a t e f o r  the n o n  d e n t i a l c o n s t r u c t i o n w a s to e s t i m a t e t o t a l i n d u s t r i a l i n v e s t m e n t , the a b o v e  exports  estimates for  machinery  dential c o n s t r u c t i o n w a s  and equipment,  subtract  f r o m w h i c h the  s u b t r a c t e d to o b t a i n t h e e s t i m a t e s f o r  resi-  the  resinon-  1 residential construction. As investment  c a n be s e e n ,  estimates depend  national product similar  and  a l l the a b o v e  and any  proportional  m e t h o d s of d e t e r m i n i n g  h e a v i l y o n the e s t i m a t e s f o r  errors errors  the  future  gross  i n t h e s e f i g u r e s w i l l t e n d to r e s u l t in t h e v a r i o u s  c a t e g o r i e s of  in  investment  estimates.  1  T h i s i s a v e r y c o n d e n s e d f o r m u l a t i o n of t h e m e t h o d u s e d a n d d o e s not i n d i c a t e s o m e c r i t i c a l a s s u m p t i o n s that w e r e m a d e a b o u t the c o m p o s i t i o n of t h e m a c h i n e r y a n d e q u i p m e n t i n t h e t o t a l i n v e s t m e n t e s t i mates. F o r a d e t a i l e d o u t l i n e , the r e a d e r s h o u l d c o n s u l t the C a v e s and Holton Study, P . 348.  111. C.  Capital Output  Because  t w o of t h e  on a forecast for measure for  Ratio  the  methods  described above  c a p i t a l output r a t i o  of the p r o d u c t i v i t y  of  capital and  c a p i t a l a c c u m u l a t i o n to p r o d u c e  seem  advisable  c a p i t a l output  to c o m m e n t  b e c a u s e the r a t i o  s e e m that t h e f i v e  The  size,  the f o r c e s t e n d i n g  main  in C a n a d a  r i c h n e s s and  resources.  As  s t o c k s of n a t u r a l  a  need  it  would  to a f f e c t  one  f o r c e s that h a v e have  been  the  the  It s e e m s  l o c a t i o n of t h e s t o c k of  must  go  resources,  expands  generally and  farther  a f i e l d to e x p l o i t  of t h e  isolate and analyze s i t i o n of t h e  new  develop-  ratio.  c o n c e d e d that a s the C a n a d i a n  fills out,  to  natural  the i n c r e a s e d c o s t of  economy  t h e p o s s i b l e e c o n o m i e s of s c a l e  a l l o w a d e c l i n e in t h e c a p i t a l o u t p u t  P o s s i b l y one  tended  following:  m e n t w i l l t e n d to i n c r e a s e t h e c a p i t a l o u t p u t  3.  is  i s a n i n d i c a t o r of t h e  a c e r t a i n f l o w of g o o d s ,  briefly on  affect the c a p i t a l output r a t i o  2.  heavily  ratio.  It w o u l d  1.  and  depend  most  ratio.  s i g n i f i c a n t but  i s the c h a n g e  national output.  most  d i f f i c u l t to  i n the i n d u s t r i a l  There  will  seems  compo-  considerable  b e l i e f a m o n g e c o n o m i s t s that i n d u s t r i a l g r o w t h  in  Western  112.  countries  implies a gradual  change  distribution f r o m dependence industries towards  decline  in the c a p i t a l output r a t i o .  services ratios  4.  The  are  much  This  and  w o u l d t e n d to i n d i c a t e a  not b e t r u e  In C a n a d a ,  general  however,  b e c a u s e i n c l u d e d in the  transportation and communication which higher  change  primary  a r i s i n g i m p o r t a n c e of s e r v i c e  industries.  may  industrial  on agriculture and  ertiary  this may o r  in the  t h a n the e c o n o m y  as a  i n t h e r e l a t i v e a v a i l a b i l i t y of  whole.  labour  and capital  a n d h e n c e t h e i r r e l a t i v e p r i c e s w i l l affect the r a t i o . increase  i n t h e s u p p l y of c a p i t a l r e l a t i v e to that of  l i k e l y to h a v e  an  ratio.  however,  This,  of the n e w  influence on  capital goods  have  An labour  i n c r e a s i n g the c a p i t a l -  i s not d i v o r c e d f r o m the  is  output  productivity  r e l a t i v e to t h o s e w h i c h a r e  already  in p l a c e .  Although  5.  not e n t i r e l y  mentioned,  independent  of the p r e v i o u s  points  t e c h n o l o g i c a l c h a n g e s w h i c h t e n d to i n c r e a s e the  p r o d u c t i v i t y of a l l f a c t o r s of p r o d u c t i o n , w i l l t e n d to b e r e f l e c t e d in a l o w e r  Past  four  including  c a p i t a l output  capital, ratio.  Trends  Upon  reviewing  Canadian  gross  capital formation  as a  percentage  113. of t h e g r o s s depression between  national p r o d u c t ,  a n d the w a r s , and  18  Within residential been  this r a t h e r  stable g r o s s  machinery  the v o l a t i l e c o m p o n e n t s  i m p a c t of  ably  of  a high  diluting the r e s u l t i n g  One  of t h e  major  over  time,  investment  The import  domestic  problems  have  investment.  non residential  expenditures  in m a c h i n e r y  domestic and  busi-  consider-  i n e v a l u a t i n g the p r o b a b l e  especially private variations  expenditures  expectations concerning  depend  investment, i n l e v e l s of very  U.S.  industries require  a far  magnitude  i s that of  form-  resource-related  heavily on  the  the i n t e r n a t i o n a l  resource  expenditures  resi-  domestic activ ity.  m a n c e of,  These  equipment  also  Non  c o n t e n t w i t h the e f f e c t of  Such  extent,  the  accumulation have  investment  expenditures.  great  constant  c o n c e n t r a t e d b e c a u s e of t h e h i g h  i n g a n e s t i m a t e of the p r o b a b l e  and  the  both  national p r o d u c t .  both r e s i d e n t i a l a n d  is v e r y  has  and  of g r o s s  c o n t e n t of s u c h e x p e n d i t u r e s . however,  of  been r e m a r k a b l y  capital formation,  r e l a t i v e l y s t a b l e f u n c t i o n s of g r o s s  domestic activity  ness,  have  c o n s t r u c t i o n a n d t h e net i n v e n t o r y  The on  the f i g u r e s  the c h a o t i c y e a r s  percent.  20  dential c o n s t r u c t i o n and been  except for  economy  the and  perforto  a  economy.  larger  capital  stock  114. for  a g i v e n v a l u e of o u t p u t t h a n the b a l a n c e of the e c o n o m y  hence,  their t r e m e n d o u s  p e r i o d s of d e v e l o p m e n t and w o r l d  demands  Although many  l e v e r a g e o n the C a n a d i a n e c o n o m y in r e s p o n s e raw  Canada's  western countries,  national product such  for  as  or  U.S.  and s e m i - p r o c e s s e d materials.  investment its high  Rinland.  program  investment  i s h i g h r e l a t i v e to  i n r e l a t i o n to  30 p e r c e n t a s c o m p a r e d  compared  w i t h the  gross  specialized northern  B o t h of t h e s e t w o  of a l m o s t  15 -  during  to e x p e c t e d i n c r e a s e s in  i s q u i t e s i m i l a r to o t h e r  Norway  and  with C a n a d a ' s  17 p e r c e n t f i g u r e s f o r  countries  countries have 1 8 - 2 0  the U . S .  ratios  percent and  and  United  Kingdom. '  A  number  of  explanations have  h i g h r e l a t i v e l e v e l of C a n a d i a n ly s t r e s s e d a r e  1.  The  1  The  investment.  The  f a c t o r s most  common-  as follows:  need for  winter 2.  b e e n a d v a n c e d to e x p l a i n t h e  more  e x p e n s i v e b u i l d i n g s b e c a u s e of  climate.  size and geographic  f e a t u r e s of the  country.  D . A . W h i t e ; B u s i n e s s I n v e s t m e n t to 1 9 7 0 ; A Report P r e p a r e d f o r the E c o n o m i c C o u n c i l of C a n a d a , 1 9 6 4 , P . 15.  extreme  115. 3.  The  s p a r s n e s s of t h e  4.  The  e a s t - w e s t o r i e n t a t i o n of t h e c o m m u n i c a t i o n  Concerning Caves been  1  a n d the D .  w o u l d fall f r o m the 3 . 1 2  1955  to a b o u t  2.88  in  figure  1970.  They  a b l e a s s u m p t i o n c o n s i d e r i n g in  growth  far  A.  u n l i k e l y to p e r s i s t f o r iron ore  mining  1911  however,  d e c l i n e in a g g r e g a t e long.  and handling  Examples facilities,  m e t h o d o u t l i n e d in the  342.  Page  22.  has  concluded  figure  not a n  ratio w a s  unreason-  2.5.  it w a s felt that the capital stock  capital output r a t i o s  given a r e the S t . for  in  recent growth appear  the d e v e l o p m e n t  Lawrence  Seaway  aluminum  smelting.  of pro-  1980  In a r r i v i n g at e s t i m a t e s f o r  Page  there  a n d the 2 . 9 1  the U . S .  t h e e x p a n s i o n of h y d r o - e l e c t r i c p o w e r  F o r e c a s t to  2  It w a s  felt that t h i s w a s  1955  White s t u d y ,  in  i n e x c e s s of r a t e s of a g g r e g a t e  i a n d the a c c o m p a n y i n g  E.  White S t u d y ,  the  H o l t o n s t u d y that t h e d e c l i n e i n t h e c a p i t a l o u t p u t  ratio  ject,  A.  a s e c u l a r d e c l i n e in t h e c a p i t a l o u t p u t r a t i o .  In the D .  networks.  the c a p i t a l output r a t i o a n d a s d i s c u s s e d by  and Holton study  in the C a v e s a n d  stock  population.  methodology  investment section will  expenditures, be  used.  the f i r s t  116. Upon it w o u l d but  reviewing  seem  that t h e  individually,  the f a c t o r s a f f e c t i n g the c a p i t a l output r a t i o , i m p a c t of a n y  single factor  the f a c t o r s t e n d to w o r k  in o f f - s e t t i n g  a b s e n c e of  qualitative tools for  determining  the d i r e c t i o n the c a p i t a l output r a t i o  future  probably  ratio.  The  Royal  in the r a t i o , Caves  and  the  to a s s u m e  A.  study  will remain  constant for  value  White study  assumed  assumed  it w i l l  If d e p r e c i a t i o n  is a s s u m e d  to e q u a l  developed  in C h a p t e r  V,  i n d i c a t e d in T a b l e  26 a n d  it w o u l d  seem  for  difficult  the c a p i t a l output  12 p e r c e n t of g r o s s  investment  i l l u s t r a t e d in R i g u r e  12 p e r c e n t b e i n g t h e a v e r a g e of w h i c h w a s 1 1 . 7 to 1 2 . 6 p e r c e n t .  the  the  ratio.  i n c r e a s i n g at t h e r a t e of 4 . 2 5  the e s t i m a t e s f o r  the  and  ratio  and will approximate  inventories.  the  increase  that t h e c a p i t a l o u t p u t  the f o r e c a s t p e r i o d  the o u t p u t to b e  factor  regarding  a constant r a t i o ,  direction for  be a s s u m e d  each  e x p e c t e d a slight  factors,  i n c l u s i v e of  and  of  in either  of  The  i s l i k e l y to t a k e i n  a d e c l i n e i n the  3.00  product'  be a s  example,  a definite t r e n d this r e a s o n  the i m p o r t a n c e  for  significant  directions.  the c o n f l i c t i n g a s s u m p t i o n s  light of t h e f o r e m e n t i o n e d  Ror  present  appraising  Commission,  D.  Holton  In the  ratio.  accounts for  c o u l d be  1955-63  its  national  percent  expenditures  as would  4.  period,  the  range  117. T A B L E  26  E S T I M A T E D  I N V E S T M E N T  ( B i l l i o n s of  1949  E X P E N D I T U R E S Dollars)  Output Net Increase Capital @ 4.25% Required  Total Capital Required  Year  G N P  Depreciation ( 1 2 % of G N P )  1965  36.15  4.33  31.82  1.35  4.05  8.38  1970  44.82  5.37  39.45  1.68  5.04  10.41  1975  55.07  6.61  48.46  2.06  6.17  12.78  1980  67.48  8.09  59.39  2.52  7.55  15.64  NNP  FIGURE  4  -  INVESTMENT  E X P E N D I T U R E  E S T I M A T E S  1965  -  1980  119. VII.  A.  G O V E R N M E N T  E X P E N D I T U R E  Methodology  Forecasting  government  e x p e n d i t u r e s s e e m s to b e o n e of  m o s t d i f f i c u l t e c o n o m i c v a r i a b l e s to c o p e w i t h . are  that g o v e r n m e n t s p e n d i n g  the g e n e r a l  income o r  Government  rather  As penditures  is geared  decrease spending on  health and w e l f a r e ,  c o m p o n e n t s of t h e g r o s s  on general  investment  defence,  war  by  prosperity.  One  the g o v e r n m e n t  education,  national p r o d u c t ,  national product  be e x p e r i e n c e d .  assumptions,  this p r o b l e m  of  expenditures.  to p o l i c y c h a n g e s ,  l i k e l y to f l u c t u a t e t h r o u g h w i d e r  depression or  upon  decisions roads,  etc.  a p e r c e n t a g e of g r o s s are  reasons  not e x a c t l y t i e d to a n y  the e c o n o m i c v a r i a b l e s s u c h a s  to i n c r e a s e o r  main  t e n d s to b e t h e l e a s t d e p e n d e n t  l e v e l of e c o n o m i c a c t i v i t y a n d  spending  The  the  however,  As  s w i n g s than  mentioned  long r a n g e  basic  i s that no  changes  extreme  under  the s e c t i o n  projections  circumvent  a s s u m p t i o n that m u s t  major  ex-  other  s h o u l d p e r i o d s of  s p e c i f y i n g t h e f o r e c a s t to a s s u m e other  government  general be  peacetime  made  regarding  in e c o n o m i c p o l i c y w i l l  result  I from changes  in political p o w e r .  would appear  that o n e  Given  these assumptions then,  c o u l d a t t e m p t to f o r e c a s t g o v e r n m e n t  it  expenditures  120. by one o r  a c o m b i n a t i o n of t h e  One  might f i r s t e x a m i n e  government and assume c o u l d be  methods  some  outlined  the p a s t p e r  below.  c a p i t a s p e n d i n g of  continued trend  into t h e f u t u r e  m o d i f i e d b y a n e x p e c t e d p o l i c y c h a n g e s that a p p e a r  the  which likely  to b e e f f e c t e d .  A  similar approach  the f u t u r e  would  b e to e x t r a p o l a t e o r  c u r r e n t t r e n d s of t h e a g g r e g a t e  compound  figures for  into  government  spending.  B o t h of t h e a b o v e errors  d u e to the s h e e r  assumed trends. the e r r o r s  are  broken  made has  might  very  down  and open  ernment expenditure, might  large the  d i f f i c u l t to e s t i m a t e t h e p o s s i b l e s i z e of  if g o v e r n m e n t  expenditures  into t h e i r f u n c t i o n a l c a t e g o r i e s a n d f u t u r e by  to  expect.  various ad hoc  the a d v a n t a g e of g a i n i n g  in a c c u r a c y o n e  crude  a s to the i n t e r p r e t a t i o n of  r e s u l t s w o u l d s e e m to r e s u l t  in e a c h c a t e g o r y  A  are  guesswork  It i s a l s o  that o n e  Better  methods  methods.  While  i n s i g h t a s to t h e c h a n g i n g  it i s s o m e w h a t  estimates this  p a t t e r n of  d i f f i c u l t to d e t e r m i n e  the  method gov-  increase  expect.  f i n a l m e t h o d that m a y  b e u s e d to e i t h e r  c h e c k t h e r e s u l t s of  121 . other  methods  or  to m a k e o r i g i n a l a g g r e g a t e  governmental  expenditure  estimates  i s to l i n k t h e g o v e r n m e n t e x p e n d i t u r e s to t h e g r o s s  product.  The  torical  main r e a s o n for  p a t t e r n s of  a c c e p t i n g this link w o u l d  economic growth  Past Trends  Peace  and  F o r e c a s t to  have  c e n t of t h e a n n u a l  The reveals ility.  gross  historical r e c o r d for  successively higher  This  may  in W e s t e r n  usually ranged  national  has  public s e r v i c e s .  democracies  s h o w n that net c o m b i n e d  a l l l e v e l s of g o v e r n m e n t h a v e  his-  1980  time total p u b l i c s p e n d i n g  the p a s t t w e n t y y e a r s  b e that  s h o w that i n c r e a s i n g w e a l t h  often b e e n a s s o c i a t e d with i n c r e a s i n g d e m a n d for  B.  national  between  expenditures 18 a n d  30  over by per-  product.  Canadian  governmental  expenditure  p l a t e a u s of s p e n d i n g of c o n s i d e r a b l e  be s e e n in the table  below.  stab-  122. T A B L E  27  T O T A L N E T  QF  G O V E R N M E N T  I N T E R - G O V E R N M E N T A L ( B i l l i o n s of  Year  G N P  E X P E N D I T U R E  Current  Government Expenditure Percent Total of G N P  T R A N S F E R S  dollars)  Year  G N P  Government Expenditure Percent Total of G N P  1946  12.0  3.63  30.2  1956  31 . 2  8.25  26.4  1947  13.7  3.05  22.4  1957  31 . 4  8.59  27.4  1 948  15.5  3.20  20.6  1958  32.9  8.74  27.5  1949  16.4  3.63  22.2  1959  34.9  9.86  27.4  1950  17.8  3.83  21 . 5  1960  36.3  10.50  29.0  1951  21 . 5  4.85  22.3  1961  37.5  11.10  29.6  1 952  23.3  6.17  26.5  1962  40.6  12.19  29.4  1953  24.5  6.42  26.2  1 963  43.2  12.96  30.0  1954  24.0  6.59  27.4  1964  47.0  14.60  31 . 0  1955  27. 1  7.35  27.2  1 Ltd. ,  H i s t o r i c a l S t a t i s t i c s of 1 9 6 5 , p p . 131 , 1 3 5 .  Canada;  MacMillan Company  of  Canada  123, One study w e r e  area where  c o n s i d e r a b l y in e r r o r  of g o v e r n m e n t a l below  t h e p r e d i c t i o n s of t h e C a v e s  spending  T A B L E  Holton  w a s t h e i r e s t i m a t e of t h e  between  i n d i c a t e s the s i z e a n d  and  l e v e l s of g o v e r n m e n t .  d i r e c t i o n of the  division  Xhe  table  errors.  28  A C X U A L  G Q V E R N M E N X  A S B Y  C O M P A R E D  L e v e l of Government  1949  Dollars  DIVISION  E S T I M A T E S  H O L T O N and  Actual  1 953  Federal  WITH  C A V E S , A N D  (Billion  E X P E N D I T U R E  S X U D Y  p e r c e n t of  1  total)  Assumed 1970  1 964  3.58  67%  4.20  45%  6.00  60%  Provincial  .97  18%  3.34  36%  2.00  20%  Municipal  .81  15%  2.69  29%  2.00  20%  5.36  100%  10.23  100%  10.00  100%  Xhe  two  b a s i c a s s u m p t i o n s that a p p e a r e d  e s t i m a t i o n of g o v e r n m e n t 1.  expenditure  In a p r e d o m i n a t e l y  are  as  under-  follows:  private enterprise economy,  a s s u m e d a continuing tendency  ' D . B . S .  to c a u s e t h i s  for  m o s t of t h e  it w a s gross  124. n a t i o n a l p r o d u c t to b e s p e n t This  meant  no  sharp  national product 2.  by f i r m s and  i n c r e a s e in t h e p e r c e n t of the  gross  g o i n g to p u b l i c f i n a n c e .  It w a s a l s o b e l i e v e d that a n y in a n y  households.  a t t e m p t to i n c r e a s e  spending  l e v e l of g o v e r n m e n t w o u l d b e at t h e e x p e n s e of  the  o t h e r s a n d t h e i m p l i e d c o n f l i c t w o u l d t e n d to s t a b i l i z e t h e w a y s of u s i n g t h e t o t a l g o v e r n m e n t f u n d s margin  of e r r o r  in long r a n g e  a n d to l e s s e n t h e  p r o j e c t i o n s of  government  expenditures.  However seemed,  appropriate  these assumptions  past e x p e r i e n c e w o u l d  the c o m p o s i t i o n of g o v e r n m e n t  significantly.  Ror  18 p e r c e n t of g r o s s 1964  whereas to  11  the  in  1953  I,  the m a i n r e a s o n  the R e d e r a l  national product  in  for  in  1964.  As  will  may  inappropriateness.  expenditure  has  changed  1 9 5 3 d r o p p e d to  14 p e r c e n t  increased from 4.4  become apparent  t h i s i s that s e c t o r s of g o v e r n m e n t  in  in  Appendix  expenditures Pro-  governments.  In a n e f f o r t to a r r i v e expenditure, was  to  percent  e x p e r i e n c i n g g r e a t e s t p u b l i c d e m a n d t e n d to b e t h o s e s u p p l i e d b y vincial  have  expenditures which amounted  Provincial expenditures  percent  s e e m Dr  s e e m to i n d i c a t e t h e i r  In p a r t i c u l a r ,  example  may  as  at a n e s t i m a t e f o r  i n d i c a t e d in A p p e n d i x  aggregate  1, t h e g o v e r n m e n t  divided along functional lines and estimates made  government expenditure  within  each  125. category.  M o s t of the e s t i m a t e s m a d e  information  presented  C o u n c i l of C a n a d a . are  summarized  i n the R i r s t A n n u a l The  the  in T a b l e  most r a p i d  trends would  growths  in e x p e n d i t u r e  As in a g g r e g a t e  i n d i c a t e d in T a b l e government  29,  include education,  social be  municipal governments,  expenditure  the  i n d i c a t e d in T a b l e  it w o u l d a p p e a r  expenditure  e x p e c t e d to a p p r o x i m a t e  r a t e of  in A p p e n d i x I  28  continue.  of r e a l o u t p u t i n t h e e c o n o m y , are  Economic  B e c a u s e t h e s e c a t e g o r i e s t e n d to  i n t h e d i v i s i o n of g o v e r n m e n t l i k e l y to  on  2 9 that t h e c a t e g o r i e s e x p e c t e d to  t h e j u r i s d i c t i o n of p r o v i n c i a l a n d  seem  R e v i e w of the  based  29.  welfare and transportation. under  I are  r e s u l t s of the e s t i m a t e s m a d e  It c a n b e s e e n f r o m T a b l e show  in A p p e n d i x  will approximate  the g r o w t h  2.6  that w h i l e t h e  rate  in p e r  t h e r a t e of capital  p e r c e n t w h i c h e q u a l s the  growth growth  figures  1930-1960  growth.  The  net c o n t r i b u t i o n of g o v e r n m e n t  expenditure has historically amounted government  expenditure  projected values are  and  shown  e x p e n d i t u r e to g r o s s  to a p p r o x i m a t e l y  is i n c l u d e d in T a b l e in P i g u r e  5.  29.  national  6 6 p e r c e n t of t o t a l The  historic  and  980  to  127. T A B L E  29.  E S T I M A T E S  Q F  G O V E R N M E N T B V  E X P E N D I T U R E  FUNCTION  ( M i l l i o n s of  1963  FUNCTION  dollars)  1965  1970  1975  1 980  1 ,940  1,810  1 ,680  1 ,560  Education  2,350  3,080  4 , 140  5,940  Social  Welfare  2 , 140  2,610  3 , 1 80  3,860  Transportation  1 ,850  2,440  3,200  4 , 120  1 ,450  1 ,940  2,600  3,020  1 , 150  1 ,270  1 ,400  1 ,530  3 ,460  4,330  5,430  6.800  14,340  17,480  21,630  26,830  8,000  9,700  12,010  14,890  5 ,260  6 ,400  7,920  9,810  National  Defence'  Health and Interest  Hospital  Services  Costs  Others T O T A L 2 Total  in  1949  Dollars  N e t c o n t r i b u t i o n to  G . N . E .  36,150  44,820  55,070  67,480  Net G o v e r n m e n t expenditures a s a p e r c e n t of G . N . P .  15.0  14.5  15.2  14.8  Population Estimates  19.6  21 . 5  23.6  25.8  409  451  508  578  G.N. P.  (1949  Dollars)  (Millions)  P e r Capita Expenditure (1949 D o l l a r s )  ' A s s u m i n g a constant 2 ,000 million c e n t a n n u a l c h a n g e in the p r i c e l e v e l . 2 Using  G . N . p.  deflator  index from  1963 d o l l a r s a n d a 1  D.B.S.  Statistics.  . VHl  A.  P E R S O N A L  E X P E N D I T U R E  Introduction.  Because the t h e o r y fair  CONSUMPTION  the i m p o r t a n c e of t h e c o n s u m p t i o n - i n c o m e  of e m p l o y m e n t  has prompted  a m o u n t of k n o w l e d g e  consumption  is known  in the s h o r t r u n .  r e l a t i o n s h i p it s e e m s v e r y  many  about  Ror  the  r e l a t i o n to  s t u d i e s in this a r e a ,  consumption and long r u n  a  changes  in  consumption-income  few emphirical studies have  been  made  and  1 t h e s t a t e of k n o w l e d g e The  basic problem  p e n s i t y to c o n s u m e  income.  propensity  In t h e  beyond  the h y p o t h y s i s  i s that i n t h e s h o r t r u n ,  i s different  a n d that t h e a v e r a g e l e v e l s of  i s not f a r  f r o m the a v e r a g e to c o n s u m e  long r u n ,  the m a r g i n a l  propensity  is different  however,  stage.  the  for  to  pro-  consume  different  consumption-income  2 ratio and  t e n d s to b e c o n s t a n t marginal  and  in a n a r i t h m e t i c a l s e n s e ,  p r o p e n s i t i e s to c o n s u m e  are  not o n l y  the  constant,  average but  equal.  T h e most r e c e n t t h e o r i e s w o u l d include those of: J a m e s S . D u e s e n b e r r y : I n c o m e , S a v i n g a n d the T h e o r y of C o n s u m e r B e h a v i o u r ; H a r v a r d U n i v e r s i t y P r e s s , 1949. ( b ) M i l t o n F r i e d m a n : A T h e o r y of the C o n s u m p t i o n F u n c t i o n : P r i n c e ton U n i v e r s i t y P r e s s , 1 9 5 7 . ( c ) F r a n c o M o d i g l i a n i : " F l u c t u a t i o n s in the S a v i n g s I n c o m e R a t i o : A P r o b l e m i n E c o n o m i c F o r e c a s t i n g " i n S t u d i e s of I n c o m e a n d W e a l t h , V o l . 11, N a t i o n a l B u r e a u of E c o n o m i c R e s e a r c h , 1 9 4 9 . (a)  2 National  S i m o n K u z n e t s ; U s e s of N a t i o n a l I n c o m e i n P e a c e a n d B u r e a u of E c o n o m i c R e s e a r c h , 1 9 4 2 , p . 3 1 .  War;  129. A l l of t h e s e t h e o r i e s a t t e m p t to r e c o n c i l e the short-run  c o n s u m p t i o n f u n c t i o n w i t h the s t a b l e l o n g - r u n  consume  by  sumption.  e x p l a i n i n g the s e c u l a r u p w a r d It w o u l d a p p e a r ,  h e l p in f o r e c a s t i n g the  however,  long-run  first  noted by  B.  Methodology  consumption  i n g the l o n g r u n  expenditure so  personal  t i m e of the  t h e o r i e s offer  except for  spending  to con-  little  the f a c t that  with income  m a i n l y o n the b a s i s of K u z n e t ' s fi n d i n g s  c o n s t a n c y of t h e s h a r e s of c a p i t a l f o r m a t i o n  in n a t i o n a l i n c o m e ,  expenditures are  The  propensity  as  Kuznets.'  It w o u l d s e e m  consumption  drift o v e r  that t h e  t h e y a c k n o w l e d g e t h e s t a b i l i t y of c o n s u m e r  strong  acknowledged  based on  most  estimates for  the e s t i m a t e s f o r  strongest force determining is current  that f o r  personal  the y e a r s  disposable income  any  years  disposable income.  1926-1955  (omitting  explains 99.85  and  aggregate  the g r o s s  This  personal  consumer  national  personal  indicat-  product.  consumption  relation is  1942-1945)  undeflated  p e r c e n t of t h e v a r i a n c e  of  2 undeflated  personal  Por goods  purposes  and s e r v i c e s ,  Op.  consumption. of e s t i m a t i n g f u t u r e it w o u l d  Cit. , pp.  Caves  and  s e e m a s a c c u r a t e to r e l a t e  3-15.  Holton,  p.  total c o n s u m e r  314.  expenditure consumer  on  130. expenditure personal  to g r o s s  disposable  consumer  national income  expenditure  to g r o s s  to p e r s o n a l  P a r t of t h e p r o b l e m between  personal  definitions u s e d  product  personal  houses  is considered  "The savings  durable  in the  on  goods  and  1951  and  to  to a n a l y s e t h e consumer For  functionalize  relationship  expenditure  example, goods  net  personal  and  Both  occupied  savings.  rely  personal  heavily on  and from s u r v e y s  personal  the e s t i m a t e  s e r v i c e s and  the  considered  n a t i o n a l a c c o u n t s to e s t i m a t e error.  is  accumula-  i s not  i n t h e f o r m of o w n e r than  relate  income.  consumer  savings  leaves r o o m for  1941  taken in  for  disposable  census  data  1948,  1953  years.'  Because  and  and  business rather  used  expenditure  1930,  later  ween  income  t e n d to b e e s t i m a t e d d i r e c t l y a n d  taken in and  method  itself a l s o  consumer income  savings and  product  disposable  national a c c o u n t s .  t i o n of a s s e t s i n t h e f o r m of p a r t of  national  in attempting  disposable  in the  d i r e c t l y a s to a t t e m p t  personal  services,  t h e e s t i m a t e of p e r s o n a l  disposable  income  savings  and consumer  t h e p o s s i b i l i t y of c o m p o u n d e d  M. C . Urquhart: Millan Company,of C a n a d a  i s the d i f f e r e n c e : b e t expenditure  errors  on  goods  in its estimate  H i s t o r i c a l S t a t i s t i c s of C a n a d a ; L t d . , 1965, p. 117.  The  Mac-  131 . combined make  w i t h the definitional p r o b l e m  the f i g u r e s  for  personal  indicated above  savings somewhat  would  seem  tentative r a t h e r  to than  precise.  Ror  these r e a s o n s  goods  and  would  seem  into t h i s a r e a  who  the t r e n d s  a great  has  national  spending  done extensive w o r k  has  been  best been  in t h i s  ag-  gone  i n the m e a s u r e m e n t ,  demand have  the s i t u a t i o n h a s  on  product  w i t h i n the  d e a l of s o p h i s t i c a t e d r e s e a r c h  p r e d i c t i o n of c o n s u m e r Rerhaps  expenditures  accuracy.  of s o n s u m e r  but t h e r e s u l t s of t h i s e f f o r t  disappointing. Stone  gross  to a t t a i n a n a c c e p t a b l e l e v e l of  figures,  alysis and  relating consumer  s e r v i c e s d i r e c t l y to e s t i m a t e s of  In a n a l y z i n g gregate  the,  an-  somewhat  summed  by  Richard  area:  " " T h e a p p a r e n t i m p o r t a n c e of t e r m s i n v o l v i n g t i m e in a n a l y s i s of m a r k e t d e m a n d i n d i c a t e s a s e r i o u s s i t u a t i o n , p a r t i c u l a r l y f r o m the p o i n t of v i e w of p r e d i c t i o n . R o r it s u g g e s t s that t h e m a i n l o n g - t e r m f a c t o r s d e t e r m i n i n g m a r k e t d e m a n d a r e not i n c o m e a n d p r i c e s at a l l , but a r e t h e i n f l u e n c e s w h i c h a r e h a r d to s p e c i f y a n d s t i l l h a r d e r to m e a s u r e . In s u c h a s i t u a t i o n p r e d i c t i o n , e x c e p t o v e r a v e r y s h o r t p e r i o d , must be e x t r e m e l y u n r e l i a b l e , s i n c e t h e p r e d i c t i o n d e p e n d s l a r g e l y o n t h e e x t r a p o l a t i o n of a s i m p l e f u n c t i o n of t i m e a n d not o n t h e r e s p o n s e to c l e a r l y specified and m e a s u r e d influences." ^  Richard Stone: a n d B e h a v i o u r in the 1954.  T h e M e a s u r e m e n t of C o n s u m e r s ' Expenditure United Kingdom, 1920-38; Cambridge University,  132. In v i e w of the a b o v e t a k e n by the R o y a l sectors,'  although  relatively simple,  basic approach  of s p e n d i n g etc.  with such segmented  tempt w a s  taken here  to u n d e r s t a n d  p a t t e r n s h i f t s that w e r e  being  goods  j e c t i v e j u d g m e n t a s to h o w  the o n l y  w a s to a n a l y z e t h e p a s t shelter,  trends  transportation,  expressed as a percentage  and w e r v i c e s .  spending  patterns, being  C e r t a i n l y the and  check and further  the p r o c e s s w a s  made  of atvalue  mainly  o n t h e b a s i s of  the s i g n i f i c a n t f a c t o r s affecting the  l i k e l y to i n f l u e n c e the s p e n d i n g  of c o m p a r i n g  spend-  the f a c t o r s affecting the v o l u m e  simple extrapolation with adjustments  are  by  discovered.  In p r e d i c t i n g f u t u r e  trends  spending  indicate segmental  s e c t o r s as food,  trends  expenditure on  made  would  approach  c o u l d e x p e c t i n t h i s t y p e of f o r e c a s t i n g .  in s u c h c o n s u m e r  total c o n s u m e r  p o s s i b l y the  C o m m i s s i o n to e s t i m a t e c o n s u m e r  ing w i t h i n the a c c u r a c y o n e  The  comments then,  patterns  sub-  various  i n the f u t u r e .  About  a d j u s t m e n t s to t h e s u b s e c t i o n t o t a l s w a s  w i t h a n d e q u a t i n g t h e m to t h e a g g r e g a t e  expenditure  that esti-  mates .  Another  m e t h o d w h i c h a p p r o x i m a t e s the p r e v i o u s  income elasticities for  for  estimating v a r i o u s  spending  method  categories.  uses Here  a  D . W . S l a t e r ; C o n s u m p t i o n E x p e n d i t u r e s in C a n a d a : Report the R o y a l C o m m i s s i o n o n C a n a d a ' s E c o n o m i c P r o s p e c t s , 1 9 5 7 .  133. t i m e s e r i e s of t o t a l p e r s o n a l are  These  expected changes change  do  very  groups  or  ture.  Trends  only  As  been The  theory,  such  on  to e s t i m a t e  the  consumption  changing  due  to a n a l m o s t  methods  would  expendi-  expenditure entire  at l e a s t  give  d i s t r i b u t i o n of c o n s u m e r  consumer  tastes,  changes  r e l a t i v e p r i c e s w i l l affect  lack  expendiin the  such  estimated.  Forecast  the p u r p o s e aggregate  may  changing  be s u b j e c t i v e l y  and  Since  spending  of a n a l y s i n g  of t h e s e f a c t s ,  and  the  category.  methods  e x t e n t to w h i c h  spend-  t h e n a p p l i e d to  the f o r e c a s t p e r i o d  e s t i m a t e s a s to the s i z e a n d  can only  trends,  for  spending  e l a s t i c i t y of the v a r i o u s  little to d e s c r i b e t h e f a c t o r s a f f e c t i n g v a r i o u s  d i s t r i b u t i o n of i n c o m e  C.  deflated c a t e g o r i z e d  elasticities a r e  each  the a b o v e  consumption  The  trends  of  the i m p o r t a n c e  long-run  workable  income  in i n c o m e  in c o n s u m p t i o n  Although  of  and  c o r r e l a t e d to c a l c u l a t e t h e i n c o m e  ing c a t e g o r i e s .  ture  income  of t h i s p a p e r  figures for  is concerned  consumer  be e x p e c t e d f r o m the a b o v e  goods  and  s e r v i c e s in C a n a d a  fairly constant a s a portion indicated average  of  66.6  spending  as shown  has  tended  with  w i l l be  d i s c u s s i o n , the  of t h e t o t a l g r o s s  percent  mainly  examined.  consumer  in T a b l e  national  broad  30  has  product.  to b e t h e p a t t e r n  for  134. the p a s t f o u r  decades where  in the  1926-28  period  the  portion  1 amounted  to 6 7 . 2  T A B L E  30  percent.  C O N S U M E R  E X P E N D I T U R E AND  1949  Dollars)  G r o s s National Product  1 947 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63  G O O D S  RVICEi  ( B i l l i o n s of  Year  ON  2  Consumer Total  15.4 15.7 16.3 17.5 18.5 20.0 20.8 20.2 21 . 9 23.8 24. 1 24 . 4 25.2 25.8 26.5 28. 1 29.4  -  P e r c e n t of  10.7 10.4 10.9 11.6 11.8 12.6 13.3 13.6 14.7 15.6 16. 1 16.6 17.4 17.9 18.5 19.2 20.0  ' E c o n o m i c C o u n c i l of 1964, p. 5 6 .  Canada;  Economic  G N P  69.5 66.3 66.8 66.4 64.0 63.0 64.0 67.4 67.2 65.5 66.8 68.0 69.0 69.5 70.0 68.4 68.0 1149.8  Average  1970;  Expenditure  67.5  G o a l s for  Canada  2 M.  C.  Millan Company  Urquhart;  Historical  of C a n a d a  Ltd.,  S t a t i s t i c s of C a n a d a ,  1965,  p.  132.  the  Mac-  to  135. Although sumer  tastes, and changes  changes there  b e c a u s e of c h a n g i n g r e l a t i v e p r i c e s ,  in t h e s p e n d i n g  appears  ate c o n s u m e r  to b e  in t h e d i s t r i b u t i o n of i n c o m e  p a t t e r n w i t h i n t h e total m a y  spending  a s a p e r c e n t a g e of g r o s s  goods  T A B L E  be e x p e c t e d ,  and s e r v i c e s would  be a s  aggreg-  national product  s i g n i f i c a n t l y w i t h i n the f o r e c a s t  If t h i s c o n s t a n c y i s a s s u m e d ,  con-  substantial  little r e a s o n to e x p e c t t h e s t a b i l i t y of the  h i b i t e d i n the p a s t to c h a n g e  on  changing  the e x p e c t e d c o n s u m e r i n d i c a t e d in T a b l e  period.  spending  31 .  31 . E S T I M A T E S ON  O F  G O O D S  ( B i l l i o n s of  C O N S U M E R AND 1949  SPENDING  S E R V I C E S . Dollars)  Y e ar  G . N. E .  Consumer  1965  36.15  24.2  1970  44.82  30.0  1975  55.07  36.9  1980  67.48  45.2  ex-  Expenditure  IX.  A.  FOREIGN  Introduction Ror  an open  foreign trade  is so  economy  s u c h a s the C a n a d i a n e c o n o m y  important  a t t e m p t to f o r e c a s t i t s f u t u r e  to i t s w e l l - b e i n g a n d  be  limited by  i s to r e v i e w  u s e d to f o r e c a s t t h e i m p o r t s  a n d t h e i m p l i c a t i o n s that t h e s e t r e n d s economic  B.  As  The  two  such,  s o m e of the m e t h o d s  t r e n d s of C a n a d a ' s  may  the  that  have  a n d to  at-  foreign  have on  Canada's  imports  cannot be  long  trade term  Imports  many factor f o r e c a s t s ,  The  magnitude  the d i r e c t i o n a n d Canadian  import  depends  o n t h e s i z e of  restrictions as well as many other  a n d t h e s t r u c t u r e of c l a s s e s of  of t h e i m p o r t s  forecast  l e v e l of i n t e r n a t i o n a l c a p i t a l f l o w s a n d  c o m p o s i t i o n of t h e i m p o r t s  Canada only  -  with so  in the a b s t r a c t .  l e v e l of  As  need  prospects.  Methodology  exports,  the  d e p t h of s u c h a s t u d y  a n d e x p o r t s of a c o u n t r y  t e m p t to i d e n t i f y s o m e of the u n d e r l y i n g  any  must r e v i e w  t h e r e s o u r c e s of the f o r e c a s t e r s .  m a i n o b j e c t of t h i s c h a p t e r been  The  where  development,  position in w o r l d t r a d e  p a r t i c i p a t i o n in the w o r l d e c o n o m y . only  T R A D E  depends  Canada's  influence.  the  factors.  o n t h e s t r u c t u r e of d e m a n d c o m m e r c i a l p o l i c y to  mention  in  137. Thus,  the central problem in making a complete forecast of  imports is to analyze the import implications of various possible situations with r e g a r d to demand, cost, capital flows,  commercial policy  and such together with the consistency of the import and other facets of economic prospects.  A  large volume of impressionistic evidence and casual opinion  suggests that Canada's imports bear a significant relation to both personal consumption and g r o s s domestic investment.  Analyzing this  view statistically is difficult because of the absence of any reliable breakdown between imports of consumer goods and producers' equipment.  Also the multi collinearity problem, due to the high correlation  between investment and consumption, hinders any attempt at sorting out their separate influence on the total flow if imports.  A few investigators have attempted to statistically analyze the import-export  functions in relation to economic changes of structure.  W*. A . I—ewis has argued that the growth of advanced countries' d e mand for r a w  materials is the dynamic factor governing the world  demand for industrial p r o d u c t s . '  L i k e w i s e , the statistical work of  Polak and Neisser and Modigliani shows the imports of  W. A . L e w i s , Chapters 12 and 13.  Economic S u r v e y  1919-1939;  "primary  (London,  1949),  138. countries" fact,  on their  manufacturers  p u t s at t h e c e n t r e of h i s s y s t e m ,  posedly and, a  a s dependent  output.'  Polak,  a reflection ratio which  sup-  s h o w s the r e l a t i o n b e t w e e n a n i n c r e a s e i n a c o u n t r y ' s  he a s s e r t s , these reflection r a t i o s a r e  s t a b l e e n o u g h to  in  exports support  prediction.  Xhe will  g i s t of a l l t h i s i s that f u t u r e  c o n t i n u e to d e p e n d  technology) above  u p o n the g r o w t h  of the a d v a n c e d  methodology  w o r l d trade potential  methods  to b e  d i c t i n g i n the s h o r t - t e r m r a t h e r  than the  long  Other are  methods  the o v e r - a l l o r  p o r t s a n d the  that m a y  aggregative  m a i n t y p e s of  (population,  industrial countries.  s u g g e s t s the  invisibles.  c a n be u s e d w i t h the a g g r e g a t i v e  The  approach  tative p r e d i c t i o n b a s e e s s e n t i a l l y o n  products  resources,  E x p e r i e n c e w i t h i n the  more  s u c c e s s f u l for  pre-  term.  be c o n s i d e r e d f o r approaches  in p r i m a r y  long r a n g e  forecasting  w h i c h c o n s i d e r total two general are,  simple trend  one,  im-  methods  a general  extension, and  that quali-  second,  t h e a p p l i c a t i o n of s i m p l e s t a t i s t i c a l r e l a t i o n s h i p s .  The  c e n t r a l i d e a in t h e q u a l i t a t i v e a s s e s s m e n t a p p r o a c h  a judgement r e g a r d i n g  the  long-run  trend  i n t h e r a t i o of  imports  i s to  form  to t h e  H . N e i s s e r and F . Modigliani; National Incomes and International T r a d e ; ( U r b a n a , 1953); Chapters 2 and 4. J . J . P o l a k ; A n International E c o n o m i c S y s t e m ; ( C h i c a g o , 1 9 5 3 ) ; P p . 123-126.  139. gross  national p r o d u c t .  r e s p o n s i b l e for  reviewed,  r e l a t i v e s i z e of i m p o r t s  Such  the  theory  are  The ficallyto  are  sharply  i n the i m p o r t  set d o w n , magnitude  -  together  G.N.  c a n b e b r o u g h t to  and  P.  the with  of t h e i r  a  effects.  main  d i s p l a y e d a n d t h e net  qualitative studies  impressions  judgements  re-  bear.  b a s i c a s s u m p t i o n s to t h i s t y p e of f o r e c a s t i n g but a p p l y  t h e f o r e c a s t of i m p o r t s  (a)  mainly  i s b a s e d o n t h e b e l i e f that the  m y r i a d of q u a n t i t a t i v e a n d the e c o n o m y  to b e  m a i n f a c t o r s l i k e l y to i n f l u e n c e  i n the f u t u r e  a qualitative a p p r o a c h  garding  changes  j u d g e m e n t o n the d i r e c t i o n a n d  t h o u g h t s of o n e ' s of a  factors which appear  the h i s t o r i c l o n g - r u n  relationship a r e  preliminary  The  are  given  speci-  below:  continued peacetime and full-employment  l e v e l s of  economic  activity, (b)  a h o l d i n g f i x e d of t h e l e v e l of  (c)  continued l o n g - r u n  A  slightly m o r e  groups  but w o u l d of  break  imports  The  tariff  regulations,  growth.  s o p h i s t i c a t e d m e t h o d of f o r e c a s t i n g i m p o r t s  b a s i c a l l y f o l l o w the m e t h o d above  economic  major  a n d r e a s o n i n g of the a g g r e g a t i v e  aggregative  such as food,  second general  of s t a t i s t i c a l r e l a t i o n s h i p s .  import  autos,  approach In s o m e  figures  into t h e i r  machinery,  approach various  etc.  using aggregative  cases,  would  data is the  imports have  been  use  treated  140. f u n c t i o n of i n c o m e ,  some  i n d e x of r e l a t i v e o r  absolute  prices,  and  1 perhaps  some  measure  of t r a d e  If a s a t i s f y i n g t h e o r y relationships provide  restrictions.  underlies  the r e l a t i o n s h i p s a n d  a g o o d fit to p a s t o b s e r v a t i o n s ,  e x t r a p o l a t e the p a s t r e l a t i o n s h i p s  into t h e f u t u r e .  extrapolations,  be r e c o g n i z e d  however,  in the past d e p e n d therefore,  must  on  it m u s t  a s e t of u n d e r l y i n g  b e t a k e n of t h e w a y  if t h e  it i s t e m p t i n g  When making that t h e  such  relationships  c i r c u m s t a n c e s , and  in w h i c h future  to  account,  circumstances  may  differ.  A  short-coming  of t h i s m e t h o d of f o r e c a s t i n g i s to  underestimate  c o n d i t i o n s a n d to o v e r - e s t i m a t e  rapidly  income.  falling  Although casting imports tive f i g u r e s  of  examining  national  Neisser  adjustments  appears  method  for  may  and  books  and F .  in p e r i o d s  of  find fruitful a p p l i c a t i o n in its u s e  changes  in f o r e c a s t i n g  fore-  aggrega-  in i n t e r n a t i o n a l a n d  economic  limited.  used  in this s t u d y  the h i s t o r i c r e l a t i o n s h i p  product  Many  technique  of s p e c i f i c c o m m o d i t i e s ,  without  circumstances  The  the a b o v e  imports  frequently  is the r e l a t i v e s i m p l e  between  imports  u s e this relationship together  deal with this topic. Modigliani  and  The  by J . J .  two  Polak  and  with a  gross qualitative  references being  two  approach  by  H.  examples.  141 . analysis of past and expected trends in import patterns to estimate future import figures.  C  Methodology - E x p o r t s .  Whereas a forecast for the imports of a country may be dealt with by examining demands and trends within a single country, a forecast for exports could entail an examination of the demands and trends for imports for a multitude of countries and markets.  Consider-  ing the inter-relationships of trading patterns between countries and the varying growth rates and structural changes of the importing countries, the possible depth of any export analysis could almost become infinite. Certainly because of the basic assumptions and the uncertainties i n herent in any forecast,  the principle of diminishing return sets in very  quickly and for practical purposes,  limits the forecasting of exports to  relatively simple techniques and the acceptance of some sacrifice of completeness  and detail for simplicity.  A common practice used by many sophisticated forecasts  is  to identify the main markets of a country, divide the bulk of the i m ports into broad categories,  and to analyze the trend of these imports  as indicated in the previous section.  Another general method, not completely isolated from the above method, assumes that exports of a specific country to other countries  142.  are  likely to r e l a t e c l o s e l y to c h a n g e s in the level of i n c o m e of these  importing c o u n t r i e s .  To  carry  this type of a n a l y s i s f u r t h e r ,  the  l y s i s w o u l d b a s i c a l l y entail the examination of the t h r e e f a c t o r s outlined  ana-  briefly  below:  (a)  the p r o s p e c t i v e r a t e of g r o w t h of i n c o m e and d e m a n d in the c o u n t r i e s w h i c h  a r e the best c u s t o m e r s for  each  export. (b)  the t r e n d s in the exportable of p r o d u c t i v e  capacity o v e r  of the exporting (c)  supply -  that i s ,  the  excess  p r o b a b l e d o m e s t i c consumption  country.  the potential output of p r o d u c e r s competing with the  exports  of e a c h c o m m o d i t y .  While the two a b o v e methods for  estimating future e x p o r t s  give first e s t i m a t e s , the f o r e c a s t of e x p o r t s  cannot be made in isolation  of the b a l a n c e of payments question of the country patterns of w o r l d t r a d e .  will  or  of the shifting  T h e s e topics will be d i s c u s s e d in subsequent  sections.  P.  B a l a n c e of P a y m e n t s .  The services  estimates of future e x p o r t s  and imports of g o o d s and  cannot r e s t on l o n g - t e r m t r e n d s of income and  substitution  143.  effects  alone.  estimates  The  could  import-export  be  part  stable o v e r - a l l  that  brium  balance-of-payments.  the  While adjustments  Canada  to  her  the  a  transactions, in  is,  of  estimates  has  b a l a n c e of  payments  run  balance  payment  length but  of  time.  it c o u l d  Canadian to  a  This  also  be  world  The  three  rather  stable  (a)  has  her  due  been  been  of  of  that  remained due  powerful  equili-  major  of  structural  this  century,  serious  unsolved to  long-  for  fortuitous  ways  the  international  during  one  balance-of-payments  reasons,  in w h i c h  have  been  any  the  adapted  opportunities.  most  important  Variations  in  caused  changes  by  resulted  of  imports.  A  large  come growth high  such  consistent with  economy  partly  the  pattern  number  not  which  to  be  a  world  reasons  balance-of-payments  have  (b)  in the  have  must  make  problems  may  and  to  history  partly  economy  changing  had  position  her  of  estimates  m u s r be  Canadian  in  in  appear  export  Canada's  elasticities  of  demand  Canadian content  demand such  as  Canada be  as  growth,  for  maintained  whether or  other  factors,  fluctuations in  large  groups  imports in  has  follows:  opportunities  corresponding  of  import  to  economic  number  of  why  have  Canada. a  Ror  number  automobiles  fairly  of  tend  high  in-  example, items to  with  fluctuate  the a  144.  (c)  more  than p r o p o r t i o n a t e l y  Over  a b r o a d r a n g e of C a n a d i a n  fairly  close substitutability  s o u r c e s of s u p p l y .  domestic  sector,  adjustment  especially  over  a  l e d to a  a  domestic limited  goods over  a  broad  substantial  to t h e  m e c h a n i s m of t h e  the m o d e r a t e l y  capital accounts  gross  Canadian  long r u n ,  a n d t h e l e v e l of  oper-  Canadian  investment.  faster  Canadian than h e r  accompanied with a high  same and  for  which  economic exports.  growth, Such  l e v e l of i n v e s t m e n t ,  is supplied heavily  high profitability  of i n v e s t m e n t s  imports  are  boom times the  by foreign  are  machinery suppliers.  attracts foreign  capital;  both  portfolio.  In a p e r i o d w h e n running  is  product.  the l o n g - t e r m  and equipment  direct  can  imported  i n t h e l e v e l of i m p o r t s r e l a t i v e  important  l i k e l y to b e g r o w i n g  Xhe  less w e l l ,  lead and have  In p e r i o d s of r a p i d  usually  go  r a n g e of p r o d u c t s  most  ates through  If e x p o r t s  there  imported and  for  national  International  between  incomes,  imports,  s u b s t i t u t i o n of d o m e s t i c  adjustment  Xhe  to C a n a d i a n  slower  Canada's  t h a n t h a t of h e r  development  trading  has slowed o r  partners,  the c u r r e n t  is account  145. t e n d s to b e c o m e Canadian  active as exports exceed imports.  s a y i n g s f i n d not s u c h a r e a d y  u s e d to b u y  Canadian  In g e n e r a l , economic now,  the p r e d i c t i o n i s f o r  a l l y into t h e w o r l d ,  E.  holding  Trends  p a r t i c u l a r l y the  its o w n  in W o r l d  World trade  percent  in  d e c l i n e d to a b o u t resulted 4.7  1 9 5 2 of 6 . 2  4.2  in  1954  strongly  from what  integrated  American  in the  world  it i s  economic-  economy,  and  payments.  has grown  10 c o n s e c u t i v e y e a r s . ' exports for  the  Canada's  the  1962-63  Canada's  period.  in  for  than  average  period  was  exports  and has This  s h a r e of the total e x p o r t  percent  faster  The  1948-1963  p e r c e n t of w o r l d t r a d e  percent for  to 4 . 2  last twenty y e a r s a n d  trade  with this general t r e n d ,  i n a d e c l i n e of  percent  than  of w o r l d  compared  r e a c h e d a peak  in its i n t e r n a t i o n a l  different  North  r a p i dV/  100 y e a r s ,  more  a n n u a l r a t e of g r o w t h 6.7  Canada  often  foreigners.  i n t h e q u e s t i o n of b a l a n c e of  has grown  production for  times,  Trade.  the f i r s t time in n e a r l y world  s h a r e s held by  a country which remains  such  m a r k e t at h o m e a n d a r e  p o s i t i o n to b e not f u n d a m e n t a l l y  that i s ,  generally  securities or  At  since  has  market  from  1963.  G . H a b e r l e r ; I n t e g r a t i o n a n d G r o w t h of t h e W o r l d E c o n o m y i n H i s t o r i c a l P e r s p e c t i v e ; A s p e e c h to 76th A n n u a l M e e t i n g of t h e A m e r i c a n E c o n o m i c s A s s o c i a t i o n ; B o s t o n , 1963.  146. Again world  trade  concerning  the w o r l d  the g r o u p . '  For 9.3  example,  creased  by  between  industrialized and  percent  in a like  ized'countries This  and  of w o r l d  r a t e of  t a k e n p l a c e in t h e  1954-63  as compared  countries  to  outside in^  with  trade  increasing  4.7  85  p e r c e n t of h e r  exports  however,  experienced States,  The  by  United  for  percent  is below  a l l of  Canada's  Kingdom  and  went  to  between  1954  the a v e r a g e  rate  major  trading  manufactured  goods  growth  segment.  United  46/12;  Nations;  February  A  26,  Review 1964;  in w o r l d The  of T r e n d s 20.  of  markets  composition trade  table  has  below  c h a n g e of t h e v a r i o u s  Page.  and  Japan.  t h i s d e c l i n e i s the c h a n g i n g  m o s t r a p i d r a t e of  industrial-  segments  trade.  See B/Cong.  do to c o u n t r i e s  period  i n d i c a t e s t h e r e l a t i v e s i z e s a n d r a t e s of of w o r l d  more  industrial countries  non-industrialized  increase,  possible reason trade.  between  i n c r e a s e d at a r a t e of 4 . 7  a s the U n i t e d  A  exports  in the  case,  i n c r e a s e of i m p o r t s such  g r o u p than they  far  of  period.  In C a n a d a ' s  1963.  a striking characteristic  i s that t h e i n d u s t r i a l c o u n t r i e s t e n d to e x p o r t  the c o u n t r i e s w i t h i n t h e i r o w n  percent  trend,  in W o r l d  Trade;  147. T A B L E  32  COMPOSITION  O F  IMPORTS  COUNTRIES,  B Y  INDUSTRIAL  1954-1963  ( B i l l i o n s of U . S . Dollars) 1954 1963 Value Percent Value Percent Primary  Increase Value Percent  Products  27.8  57. 2  42. 9  45.4  15. 1  54 . 4  Industrial Materials  8. 1  16. 6  13. 7  14.5  5. 6  70 . 4  25. 0  35. 8  37.9  23. 7  196 . 2  Manufactured Goods 1 2. 1  In C a n a d a , accounting for  the  the to  Of products,  of  manufactured  The  in  manufacture. trend has  exports reduced  share  of  im-  from  Canada's 21  share  percent  in  of 1954  1963. being a heavy  i s that t h e c o n s u m p t i o n of  natural  than i n d u s t r i a l p r o d u c t i o n  main r e a s o n  larger  goods  T h i s relatively slow  manufacturers  c o n c e r n to C a n a d a ,  less rapidly  that m a n u f a c t u r e d  industrialized country.  U n i t e d S t a t e s i m p o r t s of 12 p e r c e n t  show  a s m a l l e r s h a r e of e x p o r t s a n d  p o r t s than any other r a t e of g r o w t h  1963 f i g u r e s  appears  This  to b e t h e  w a s accelerated during  continued d o w n .  A  of  materials has  in m o s t  more  exporter  been  rising  industrialized countries.  e f f i c i e n t u s e of the w a r  second reason  primary  materials  but t h e s e c u l a r  appears  to b e  the  in  148. changing more  p a t t e r n of i n d u s t r i a l p r o d u c t i o n f r o m  durable  r a t i o of  goods.  T h i s trend  non-durable  goods  i n i t s e l f w i l l t e n d to r e d u c e  m a t e r i a l s c o n s u m p t i o n to a n o v e r - a l l  i n d e x of  to  the  manufacturing  1 production. Perhaps help encourage future  important  t h e i n c r e a s e in w o r l d  Agreement  on Tariffs  a n d the I n t e r n a t i o n a l  Through  Bank  these organizations,  a n d e x p a n d fhe  The  trade has  and T r a d e , for  and  i s l i k e l y to a f f e c t  the I n t e r n a t i o n a l  Reconstruction and  living,  maintain high  p r o d u c t i o n a n d e x c h a n g e of  Although  it w o u l d a p p e a r  Development, a t t e m p t e d to  l e v e l s of  fundamentally  a l t e r the c u r r e n t  i s to r e d u c e  operations l i s h m e n t of  into m o r e  competitive situation, provide  new  to a c c e l e r a t e o r  profitable channels and w o u l d  l i n e s of p r o d u c t i o n  in  many  of  to q u a l i t a t i v e  f o r c e s b r o u g h t into p l a y  existing industries with an opportunity  employ-  goods.  it i s d i f f i c u l t to r e d u c e  that t h e n e w  the  Monetary  t e r m s t h e r e d u c t i o n of s u c h t a r i f f s w o u l d h a v e o n t h e C a n a d i a n omy,  to  b e e n the f o r m a t i o n of  u l t i m a t e a i m of t h e t r a d e a g r e e m e n t s  the e x i s t i n g t a r i f f s .  developed  the w e s t e r n c o u n t r i e s h a v e  c o - o p e r a t e to r a i s e s t a n d a r d s of ment,  f a c t o r s that h a v e  p o s i t i o n in the w o r l d e c o n o m y ,  General Fund,  the m o s t  econ-  would rrany  redirect  l e a d to t h e  their estab-  Canada.  ' N a t i o n a l I n s t i t u t e of E c o n o m i c a n d S o c i a l R e s e a r c h ; F a s t a n d S l o w G r o w i n g P r o d u c t s in W o r l d T r a d e ; E c o n o m i c R e v i e w , London, August 1963, P p . 38, 39.  149. F.  P r o j e c t i o n to  As  i n d i c a t e d i n the s e c t i o n s of  estimating future relating  p o r t i o n of cept for  the g r o s s  exports have product  to a b o u t  about  1950  changes have  II w i l l  figures.  i n d i c a t e the r a t h e r  accounted for  stable  by e x p o r t s .  Ex-  23 p e r c e n t of, the g r o s s  War,  national  the m o r e however,  as  been  to C a n a d a ' s Canada's  m u c h of C a n a d a ' s  h a s r e f l e c t e d the d e m a n d f o r  detriment  t h e t r a d e of r a w  has been  .a  tendency for  m a t e r i a l s to d e c l i n e .  No  in  doubt  while  others  exports.  growth  in e x p o r t s a n d  Canada's  i n d u s t r i a l i z e d c o u n t r i e s of t h e w o r l d . there  more  i n d i c a t e d in p r e v i o u s s e c t i o n s ,  b e t w e e n the w e s t e r n e c o n o m i e s .  i n c r e a s e d the d e m a n d f o r  power  w e s t e r n e c o n o m i e s r e v e r t e d to  t a k e n p l a c e w i t h i n the w e s t e r n e c o n o m i e s a n d  Fundamentally,  more  when  economic environments,  s o m e of t h e s e s h i f t s h a v e  omic  national product  figures  figures.  t h e p a t t e r n s of t r a d e  have  of  p e r i o d i m m e d i a t e l y f o l l o w i n g the S e c o n d W o r l d  amounted  Since  many  national product  the m e t h o d  based on aggregative  f i g u r e s to t h e g r o s s  e x a m i n a t i o n of A p p e n d i x  a brief  methodology,  imports and exports a r e  import-export  An  normal  1980.  As  raw we  materials have  f r o m a r p a i d i n c r e a s e i n the t r a d e of  trend appears manufacturers  to  by  seen,  the r e l a t i v e i m p o r t a n c e  This  econ-  in  result  rather  than  150. the d e c l i n e i n t h e t r a d e of r a w  materials.  It h a s a l s o b e e n s u g g e s t e d that a n y tariffs w o u l d for  benefit  manufacturers  crease  trade  -  prevail  in m a n u f a c t u r e d  G . N . P. during  G.N. P.  it i s a s s u m e d that t h e r a t h e r  in T a b l e  contrary  the b a s i s f o r  national product  volatility and a c y c l e While  and  Canada's  Since than e x p o r t s . percentage from  .1  1950, As  close  as one  however,  somewhat  independent  the i m p o r t  figures  to 5 . 6  might  imports  have  with an a v e r a g e  c a n b e s e e n i n A p p e n d i x 11,  the  has  of  the  resemble relationship  expect.  have  a p e r c e n t a g e of t h e g r o s s  points the i m p o r t s  esti-  imports  export figures,  s l i g h t l y the f l u c t u a t i o n s in r e c e n t b u s i n e s s c y c l e s , distinct o r  the  will  33.  to e c o n o m i c t h e o r y ,  and export figures.  i s not a s  in-  stable  r e l a t i o n s h i p e x h i b i t e d in t h e l a s t t w e n t y y e a r s  a s r e l a t e d to t h e g r o s s greater  market  goods.  the f o r e c a s t p e r i o d a n d f o r m s  Somewhat  to e x p a n d h e r  world  p a r t i c i p a t e i n t h e g e n e r a l t r e n d to  exports then,  m a t e s of e x p o r t s g i v e n  shown  a n d the o p p o r t u n i t y  and thereby  Concerning export  Canada  g e n e r a l r e d u c t i o n in  consistently been national p r o d u c t ,  e x c e e d e d t h e e x p o r t s at a  of a b o u t  the v a l u e of  2.0  greater  percentage  the range  points.  i m p o r t s e x c e e d e d the  As value  151 . of e x p o r t s to t h e g r e a t e s t e x t e n t d u r i n g rapid  capital e x p a n s i o n in C a n a d a .  recent  t h e late  During  1950's,  the e a r l y  This was  p o s s i b l y d u e to t h e r e  with other  As  for  western  the f o r e c a s t p e r i o d ,  economy  economies.  develops o r  expands  not a v a i l a b l e i n C a n a d a ,  economy  imports will  The compared trading  in s i m i l a r o t h e r imports  For  Canadian  w i t h t h e p h a s e of d e v e l o p m e n t is extremely  Combining  future  the  western  demand for  a n d the  import  the e s t i m a t e s for  exmanu-  imports.  development  of t h e a g g r e g a t e  t r e n d of t h e e x c e s s of  of  as  Canada's  short imports  run. over  estimates.  future  Canadian  the  the o b s o l e s c e n c e  difficult e x c e p t in the v e r y  the long t e r m  exports a s a basis for  ranges  p a r t i c i p a t i o n in t h e w o r l d t r a d e of  a t t e m p t to j u d g e t h e p h a s e of C a n a d i a n  this r e a s o n ,  com-  c o n s i s t of c a p i t a l  natural r e s o u r c e s ,  necessitate a continued strong  partners  as  continue a s  of e x i s t i n g c a p i t a l g o o d s r e s u l t i n g f r o m t e c h n i c a l c h a n g e ,  factures will  discrepancy  the e x p e c t e d c o n t i n u e d d e m a n d f o r  a n d e x t r a c t i o n of h e r  p e c t a t i o n of g r e a t e r  and  it i s e x p e c t e d that t h e w i d e  B e c a u s e m u c h of C a n a d a ' s  development  the  economies.  i n t h e d i f f e r e n t i a l v a l u e s of e x p o r t s a n d Canadian  of  imports  being a g r e a t e r  b e t w e e n a c t u a l a n d potential output in the C a n a d i a n  goods  1960's,  b o o m r e s u l t e d in a d e c l i n e in the deficit b e t w e e n  exports.  pared  a period  gross  national  1 product  f i g u r e s w i t h the a b o v e  imports  and exports are  T A B L E  shown  assumptions, below and  estimates for  i l l u s t r a t e d in F i g u r e  total 6.  33.  E S T I M A T E S  FOR  E X P O R T S ( B i l l i o n s of  Year  future  G. N. E.  IMPORTS T Q  1949  AND  1980 Dollars)  Imports  Exports  1965  36.15  9.03  8.30  1970  44.82  11.20  10.30  1975  55.07  13.80  12.82  1980  67.48  16.85  15.50  Cn CO  X.  CONSOLIDATION  B a s e d on the r e s u l t s a r e  T A B L E  E X P E N D I T U R E  t h e e s t i m a t e s of e x p e n d i t u r e  summarized  in the T a b l e  for  the  major  divisions,  below.  34.  DISTRIBUTION E X P E N D I T U R E  Year  OF  B Y  Capital AccumulaG.N. P. tion  QF  G R O S S  MAJOR  Government Expenditure  NATIONAL  C O M P O N E N T S  Consumer Expenditure  T O  1980  Total G. N. E  E x p o r t s Imports  1965  36.15  8.38  5.26  24.20  8.30  -9.03  37.11  1970  44.82  10.41  6.40  30.00  10.30  -11.20  45.91  1975  55.07  12.78  - 7.92  36.90  12.82  -13.80  56.62  1980  67.48  15.64  9.81  45.20  15.50  -16.85  69.30  From penditure Upon  the a b o v e  table,  the e s t i m a t e f o r  e x c e e d s that of the g r o s s  the g r o s s  national product  national  by about  3  ex=  percent.  r e v i e w i n g the b a s i c a s s u m p t i o n s in o b t a i n i n g the e s t i m a t e s f o r  of the c o m p o n e n t s ,  it w o u l d a p p e a r  little w o u l d b e g a i n e d b y  a n y of t h e t r e n d a s s u m p t i o n s i n the e x p e n d i t u r e  0  components  each  changing e x c e p t to  155. make  the f i g u r e s f o r  expenditure spending  the g r o s s  balance.  components  national product  and g r o s s  national  S i n c e the b a s i c o b j e c t i v e w a s to e x a m i n e to i d e n t i f y a n y  the d i s c r e p a n c y c a n n o t  significant t r e n d s ,  b e t r a c e d to a n y  it w o u l d  single component,  seem  but  t h e d i s c r e p a n c y i s p o s s i b l y c u m u l a t i v e t h r o u g h o u t e a c h of the  the  rather compon-  ents.  Except the m a j o r relatively  p e r i o d s of s e v e r e d i s t u r b a n c e i n t h e e c o n o m y ,  c o m p o n e n t s of t h e g r o s s  may  however, change  that s p e n d i n g  Although  grow  i n the e c o n o m y . government  social welfare where does  t h e n that g o v e r n m e n t segments  of t h e g r o s s  c a n be s e e n f r o m T a b l e i s spent in a r e a s  public demand will  fairly  segment  national  expenditures  may  29,  probably  a large portion  anticipated.  any  even  It i s p o s s i b l e to  other  i n d i c a t e that  extended  of  and  continue strong  27 w o u l d  i s not l i k e l y to d e c l i n e f o r  will  r a t e of t o t a l o u t p u t  r i s e in p r o p o r t i o n  data in T a b l e  that  product,  such a s education  not e x p a n d at t h e r a t e  but t h e h i s t o r i c a l  ment e x p e n d i t u r e  seg-  figures are  w a s the o n l y  the s a m e r a t e a s g r o w t h  expenditure  if the e c o n o m y  It i s a c -  i n d i c a t e that t h e e x p e n d i t u r e of t h i s s e g m e n t  As  be  p a t t e r n s w i t h i n the m a j o r  expenditure  estimated completely independent  at a p p r o x i m a t e l y  all  other.  the g o v e r n m e n t  the r e s u l t s w o u l d  t e n d to  national p r o d u c t .  s u b s t a n t i a l l y but t h e a g g r e g a t i v e  c o n s t a n t r e l a t i v e to e a c h  was  national expenditure  s t a b l e i n r e l a t i o n to t h e g r o s s  knowledged, ments  for  govern-  period.  156. Consumer  expenditure  appears  to b e the m o s t c o n s t a n t  s t a b l e s e g m e n t , r e l a t i v e to t h e t o t a l e x p e n d i t u r e . to b e  little t h e o r y  seems trend  or  emphirical work  d i f f i c u l t to j u s t i f y a n y  assumed  there  appears  to e x p l a i n t h i s p h e n o m e n o n , increase or  it  d e c r e a s e in this  i n t h e light of s u c h h i s t o r i c a l c o n s t a n c y .  Even nal g r o w t h , growth  exports which theoretically a r e  rate very  is tied v e r y States  being  independent  e x c e p t of c o u r s e t h e a b i l i t y to p r o d u c e , s i m i l a r to t h e g r o s s  b e p a r t l y e x p l a i n e d at l e a s t ,  by  Canada's  major  in the g r o w t h  of  This  exports possibly have gross  national  product.  a  may  economy,  a n d w i t h the  t h e i m p o r t s of t h e  inter-  shown  the f a c t that the C a n a d i a n  market,  Canada's  of a n y  have  national p r o d u c t .  c l o s e l y to t h e A m e r i c a n e c o n o m y  a n d h e n c e t h e b u l k of C a n a d a ' s role  While  or  United  United  been a  States major  XI.  While some  economic theory  valuable  casting,  C O N C L U S I O N S  a n d t h e o r i e s of e c o n o m i c g r o w t h  i n s i g h t to t h e p r o b l e m  of  long-range  economic  the a b s t r a c t i o n s a n d the d e p e n d e n c e o n r a t h e r  t i o n s of t h e s e t h e o r i e s t e n d to s e v e r e l y  limit t h e i r  rigid  use for  give  foreassump-  extensive  practical application.  A b a s i s of about theory range  preliminary long-range  s e a r c h of e c o n o m i c t h e o r y  e c o n o m i c f o r e c a s t i n g r e v e a l e d that  economic growth  is limited.  While  some  Without a definite t h e o r y  u s e of e c o n o m i c t h e o r y  in l o n g - r a n g e  l i m i t e d to s e g m e n t a l a p p l i c a t i o n .  presently  much  long-range  principles and trend  Because  c o n j e c t u r e a s to h o w  long-  generally the  e c o n o m i c f o r e c a s t i n g t e n d s to As  a result,  it a p p e a r s goes  that  b a c k to f i r s t  analysis.  a theory  even  not  of e c o n o m i c g r o w t h ,  forecasting generally  of g r o w t h  t h e s t u d y of a m u l t i t u d e o f v a r i a b l e s , understood or  economic  a s s i s t a n c e in  f o r e c a s t i n g , t h e s e a r e a s t e n d to b e f e w a n d  the  knowledge  c e r t a i n a r e a s of  a s t h e c o n s u m p t i o n f u n c t i o n do o f f e r  interdependent.  be  that c o u l d f o r m  quantifiable,  would  i n v o l v e the a n a l y s i s  m a n y of w h i c h a r e  the l o n g - r a n g e  these basic variables will  and  not c l e a r l y  forecaster can change or  how  only different  158.  e n v i r o n m e n t s will affect these v a r i a b l e s . these largely accuracies  As  unknown quantities o r  f a c t o r s that contribute to the i n -  in the r e s u l t s of l o n g - r a n g e  indicated,  It would a p p e a r that it is  economic forecasting.  most of the methodology u s e d for  long-range  e c o n o m i c f o r e c a s t i n g a p p e a r s to be s o m e f o r m of b a s i c t r e n d jection.  "The t r e n d s  c h a n g e for  may be c h a n g e s in absolute f i g u r e s o r  the v a r i a b l e s .  cast d e p e n d s m a i n l y ,  The  r a t e s of  d e g r e e of sophistication of the  t h e n , on the n u m b e r of t r e n d s o r  pro-  fore-  variables  that  are examined.  The  important t r e n d s w h i c h a p p e a r to be affecting the C a n a d i a n  potential for output a r e the t r e n d s  in the w o r k f o r c e and productivity.  i-  The  relatively  high C a n a d i a n birth r a t e ,  the low death r a t e ,  and the expected continued net flow of i m m i g r a n t s , r a p i d g r o w t h r a t e of the C a n a d i a n population. the g r e a t e r  It is expected a l s o ,  participation r a t e s for w o m e n in the labour  s t r o n g influx of young any tendency for result  indicates a continued  f o r c e and  that a  people to the labour f o r c e will m o r e than offset  the decline in the participation r a t e s for  the g r o w t h rate of the labour f o r c e will be higher  men with the than the growth  r a t e of the population. With the expected b r e a k d o w n of the total labour f o r c e  into  159. agriculture,  government and  non-agricultural mental  segments  productivity,  combined  1965  and  low,  but it d o e s  1956  period.  The output a r e labour  engaged  in p e r - m a n  labour  and  force  the c o n t r i b u t i o n  The 4.26 by  productivity  growth  rate for  1928  a general man  non-agricultural  and  sector  the  rate  productivity  in this s e c t o r ; force  the  of  i n c r e a s e in t h e  s e c t o r but a l a r g e  labour  to  to e f f e c t  in the increase  indicating a continued strong  to t o t a l p r o d u c t i v i t y s i z e of t h e  be  d e c l i n e i n t h e p e r c e n t a g e of  giving  man  Canada  the  w i t h i n the e c o n o m y  public administration in this s e c t o r  per  of  growth  a substantial  overall  r a t e of g r o w t h  the p r o d u c t i v i t y  indicating a large  of t o t a l o u t p u t i s i n d i c a t e d to  It i s i n d i c a t e d that t h i s g r o w t h  a d e c l i n e in the  s e c t o r s of t h e e c o n o m y  number and  employed  a higher  rate  i n the  percentage  may  low  be  pergrowth  be  achieved  productivity  of t h e w o r k  in  increase  segment.  percent.  both  for  i n t h e a g r i c u l t u r a l s e c t o r but a h i g h  in the c o m m e r c i a l in this  percent  seg-  i n d i c a t i o n s that t h i s m a y  a slight d e c l i n e in p e r  in both the a b s o l u t e  factor  are  s e e n to b e a m o d e r a t e  governmental  man  There  commercial  in p r o d u c t i v i t y  nin-tenths  e q u a l the p r o d u c t i v i t y  a g r i c u l t u r a l output;  the  and  basic structural changes  force  increase  1980.  one  and  w i t h t h e e s t i m a t e s of t h e i r  a n o v e r a l l r a t e of g r o w t h  i s i n d i c a t e d to a p p r o x i m a t e between  public administration,  force  160. entering  the h i g h  It w o u l d long r a n g e  productivity  appear  that m a n y  national expenditure  of the g r o s s  national  national expenditure ment e x p e n d i t u r e ,  product. used  a rather  product  in the r e c e n t changes  estimates for  patterns are The  past and  in t h e s e  basic  divided,  often b a s e d o n  estimates gross  capital accumulation,  expenditure,  constant proportion  broadly  f i v e b a s i c d i v i s i o n s of  in t h i s s t u d y ,  consumer  showed  drastic  areas.  imports  and  exports,  r e l a t i o n s h i p to t h e g r o s s  it w o u l d spending  seem  governall national  d i f f i c u l t to e n v i s i o n  patterns.  any  161 . 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Expenditure  Psychological  of E c o n o m i c s ,  Analysis,  Business Cycle,  Slater, D.W., Consumption Canada, 1957.  Printer,  Printer,  O u t p u t , L a b o u r a n d C a p i t a l i n the Printer, Canada, 1957.  K n i g h t , F . H . , O n the H i s t o r y of C h i c a g o P r e s s , 1956. J .  Queen's  Review,  K i s s e r , C . V . and Whelpton, P . K . , S o c i a l and Affecting Fertility, N e w Y o r k , 1949.  Lewis,  Printer,  Hill,  Factors  University  1959.  1949. of C h i c a g o  1955-1965,  in C a n a d a ,  Can-  Queens  Press,  Public  Printer,  162.  Stone, R . , T h e M e a s u r e m e n t of C o n s u m e r ' s E x p e n d i t u r e Behaviour i n the U n i t e d K i n g d o m , 1 9 2 0 . - 1 9 3 8 , C a m b r i d g e U n i v e r s i t y P r e s s , 1954. Supple, B . E . , The Inc., 1963.  E x p e r i e n c e of E c o n o m i c  Vickrey, W . S . , Metastatistics and and World Inc., 1964. White, D . A . , B u s i n e s s , Canada, 1964.  Growth,  Macroeconomics,  Investment  to  1970,  Random  Harcourt,  Queen's  Printer,  House,  Brace  A  P  P  E  N  D  I  C  E  S  A  P  P  E  N  D  I  X  I.  A P P E N D I X  G O V E R N M E N T  Ror ing,  the p u r p o s e  the m e t h o d o l o g y  the s a m e trends  I  E X P E N D I T U R E  of a t t e m p t i n g to f o r e c a s t g o v e r n m e n t  used will  b e to s e g r e g a t e  the s p e n d i n g  functional l i n e s a s u s e d by the C a n a d a  Year  a n d t h i s r a t e of g r o w t h  extended  along  Book.  i n e a c h of the s e c t o r s w i l l b e e x a m i n e d to d e t e r m i n e  r a t e of g r o w t h  spend-  into t h e  Past the  past  forecast 1  period  but m o d i f i e d w h e r e The  major  it w o u l d s e e m  i t e m s to b e  1 .  National  2.  Education.  3.  Social  4.  Transportation.  5.  Health and  6.  Interest  7.  Others.  a d v i s a b l e to do  considered are  so.  as follows;  Defence.  Welfare.  Hospital S e r v i c e s .  Costs.  M o s t of t h e i n f o r m a t i o n a n d p r o j e c t e d t r e n d s a r e b a s e d o n i n f o r m a t i o n p r e s e n t e d in the c h a p t e r " E i s c a l T r e n d s a n d N a t i o n a l S a v i n g " of t h e R i r s t A n n u a l R e v i e w of the E c o n o m i c C o u n c i l of Canada.  1.  National  Defence  Since dollars, various about  1951  remained  National Defence  at a r e l a t i v e l y c o n s t a n t  veterans affairs a r e  2 billion d o l l a r s .  w o u l d continue out a c t u a l  in  current  billion d o l l a r s .  included, this given figure  M o s t of t h e o t h e r  When  amounts  studies a s s u m e d this  to trend  m a i n l y o n t h e b a s i s of c o n t i n u e d w o r l d t e n s i o n but  b e a s s u m e d t h e n that t o t a l d e f e n c e e x p e n d i t u r e s  c o n t i n u e to a m o u n t to a b o u t  with-  2.0  billion c u r r e n t  dollars  will  annually.  Education The  main influence on  educational facilities  As ary  1.5  has,  warfare.  It w i l l  2.  expenditure  i s t h e c h a n g i n g s t r u c t u r e of t h e s t u d e n t  i n d i c a t e d b y t h e E c o n o m i c C o u n c i l of C a n a d a , '  and secondary  135,000  t h e a m o u n t e x p e c t e d to b e s p e n t  s c h o o l population h a s  students annually  for  the last f e w  b e c a u s e of the p a s s i n g of t h e p o s t w a r drop sharply  by  1970  to a b o u t  75,000  m o r e in l i n e w i t h p o p u l a t i o n g r o w t h  Printer,  Eirst Annual Review, 1964, p. 115.  been  "baby per  population,  the  i n c r e a s i n g by  years.  By  boom"  year  on  1970,  element-  about however,  t h i s i s e x p e c t e d to  after w h i c h an  increase  c o u l d be e x p e c t e d .  E c o n o m i c C o u n c i l of  Canada,  Queen's  3. During and  the  1956-1963  technological field for  have  averaged  c o m p l e t i o n of  an annual  both  m a n y of the m a j o r  i s e x p e c t e d to d r o p  between  1963  university percent  and  expenditure  23  percent.  projects  7.9  for  current  recently  the a b o v e  then,  in both  a n d the v o c a t i o n a l a n d  6 percent  that e x p e n d i t u r e s Canada  much  been  and  per  year  capital r e q u i r e m e n t s  at  i n c r e a s i n g at the r a t e of  it w o u l d  16.4  percent  seem reasonable  the e l e m e n t a r y  are  to  and secondary  e x p e c t e d to a p p r o x i m a t e  are  emphasis on higher not  l i k e l y to s l o w  is well behind  is c o n c e r n e d ,  Canada  will  the  2.5  education,  the  10.4 for  the  expect sections after  percent  it w o u l d  s u b s t a n t i a l l y i n the  U.S.  e s p e c i a l l y for  t h e n that the r a t e of  C o u n c i l of  percent  of  respectively.  With s o  assumed  the r a t e  t e c h n o l o g i c a l f i e l d to c o n t i n u e to d e c l i n e  the r a t e s of w h i c h  education  the  period.  the r a t e s of g r o w t h  level.  expenses  B e c a u s e of  in t h i s a r e a ,  b a c k to a b o u t  vocational  and operating  a n d t h i s i s e x p e c t e d to c l i m b to a b o u t  From  and  buildings  in the  1970.  level have  1963-1970  1970,  new  expenditures  i n c r e a s e of  increase  The  period,  a s far  d e c l i n e s l i g h t l y to  14  university  a s facilities for  the g r a d u a t e  increase assumed  seem  by  level. the  percent.  higher  It w i l l  Economic  be  Using c o u l d be  the a b o v e r a t e s of  e x p e c t e d to a p p r o x i m a t e  E S T I M A T E D  i n c r e a s e then, those  EDUCATION  ( M i l l i o n s of  1963  and  Vocational and  Secondary  E X P E N D I T U R E S Dollars)  o v e r a l l r a t e of  then a p p r o x i m a t e s  3.  Social  2 , 140  2,320  200  290  390  520  390  840  1 ,610  3 , 100  2,350  3 ,080  4 , 140  5 ,940  welfare  mainly on  expenditures  the n u m b e r  in the p a s t w o u l d  changes  and  i n c r e a s e e x p e c t e d in e d u c a t i o n  expenditures  percent.  not s i g n i f i c a n t l y a f f e c t e d b y rate  1980  Welfare  Social base  6.5  1975  1 , 950  University  The  1 970  1 , 760  Technological  T O T A L  expenditures  below:  1965 Elementary  education  2 percent  health p r o t e c t i o n ,  t e n d to b e flat r a t e  of r e c i p i e n t s a n d economic  for  policy decisions and  conditions.  allow approximately  The  2 percent  i n c r e a s e d b e n e f i t s in s u c h  hospital c a r e ,  expenditures  c a r e of the a g e d ,  4 percent for  growth  population  areas  etc.  are  as  This  better same  5. r a t e of g r o w t h table  was  e x p e c t e d to c o n t i n u e to  G O V E R N M E N T  ON  SOCIAL  ( M i l l i o n s of  Social  4.  Welfare  E X P E N D I T U R E S  W E L F A R E 1963  Expenditure  Dollars)  1965  1970  1975  1980  2,140  2,610  3,180  3,860  Transportation  The  main factors here  iety d e m a n d i n g  more  and  of the c i t i e s r e q u i r i n g  special  transit  The  are  the i n c r e a s e d a f f l u e n c e of the  b e t t e r h i g h w a y s a n d the c o n t i n u e d  growth  a growing  c o s t of s u c h f a c i l i t i e s f a r  b e c a u s e t h e c o s t of p r o v i d i n g built-up  study  n e t w o r k of  soc-  rapid  urban streets  and  facilities.  b e c a u s e of t h e i n c r e a s e d s t a n d a r d of  or  resulting  below:  ESTIMATED  and  1 9 8 0 w i t h the  areas  o u t s t r i p the p o p u l a t i o n  growth  living demanding  facilities  these facilities  mean rising construction  The  r a t e of g r o w t h  is 4.26  percent for  in t h e e c o n o m y  the  1965  to  1980  better  in i n c r e a s i n g c o n j e s t e d  costs.  e x p e c t e d in the  present  period as compared  with  6. the 5 . 5 the  percent  1963  to  1970  transportation rather  e x p e c t e d by period.  sector  than the 6 . 6  Canada  to  1970.  the E c o n o m i c  For  this r e a s o n  percent This  e x p e c t e d by  assumption  FOR  Transportation Expenditure  As and  and Hospital  the i n c r e a s i n g g r o w t h health  grammes  As  to  1980  Council  l e a d to t h e t a b l e  of  below:  1963  Dollars)  1965  1970  1975  1980  1,850  2,440  3,200  4,120  continue of the  the f i g u r e  it m a y  and  the p u b l i c .  growing  in the m o r e r e c e n t  Other  e x p e c t e d that rapidly  health  because  increasing standard factors which  personnel  in m e n t a l  past,  the  at a h i g h r a t e  t r a i n i n g of  in s e r v i c e s o f f e r e d  be  to i n c r e a s e r a t h e r  population  in health r e s e a r c h ,  improvement  percent  E X P E N D I T U R E  expenditures,  s e r v i c e s being offered  t e n d to m a i n t a i n  in the  Services  with education  hospital costs will  for  T R A N S P O R T A T I O N  ( M i l l i o n s of  Health  5.5  the E c o n o m i c  would  G O V E R N M E N T  Canada  a r a t e of g r o w t h  i s e x p e c t e d to a p p r o x i m a t e  E S T I M A T E D  5.  C o u n c i l of  is expanded in this a r e a  of of  will proand  hospitals.  the g r o w t h  of e x p e n d i t u r e s  in t h i s  7. area  i s e x p e c t e d to a p p r o x i m a t e  shown  in the table  G O V E R N M E N T  H E A L T H  A N D  E X P E N D I T U R E S  HOSPITAL  ( M i l l i o n s of  1963  FOR  S E R V I C E S  Dollars)  1965  1970  1975  1980  1,450  1,940  2,600  3,020  the i n t e r e s t c o s t s a r e  dependent  Health and Hospital Expenditures  Interest  figures  below.  ESTIMATED  6.  6 p e r c e n t w i t h the r e s u l t i n g  Costs  Since indebtedness  and  this is dependent  on  d e f i c i t s at a l l l e v e l s of  government,  based on  assumptions:  the f o l l o w i n g  1.  The  government  budgets  on  the b u d g e t  the  government  surpluses  and  the e x p e c t e d i n t e r e s t c o s t s  will  come  close  to a n  are  over-all  balance. 2.  The  debt a n d  consequently  a l l o w e d to g r o w national  This mately  1.9  means  percent  the  approximately  net i n t e r e s t c o s t s w i l l  be  in s t e p w i t h the g r o w t h  in  output.  assuming per  year  the debt  c h a r g e s will  and will result  i n c r e a s e at  in the t a b l e  below.  approxi-  8. :STIMATES  OF  G O V E R N M E N T A L  ( M i l l i o n s of  Interest  7.  Costs  1963  I N T E R E S T  C O S T S  Dollars)  1965  1970  1975  1980  1,150  1,270  1,400  1,530  Others This  tection,  section includes such s e r v i c e s as police and fire  recreation and  industrial  development  community promotion  s e r v i c e s , sanitation, tourist  and government  aid for  proand  scientific  research.  It i s e x p e c t e d that t h e s e w i l l trend shown  and will approximate i n the  the 4 . 5  continue their strong p e r c e n t r a t e of  upward  increase  as  1975.  1980  past.  ESTIMATED  OTHER  G O V E R N M E N T A L ( M i l l i o n s of  Other Governmental Expenditure  1963  G E N E R A L  E X P E N D I T U R E Dollars)  1965  1970  3,460  4,330  5,430  6,800  A  P  P  E  N  D  I  X  II.  Appendix  II.  1.  G R O S S  NATIONAL E X P O R T S  P R O D U C T , F R O M  ( B i l l i o n s of  V E A R  G . N . P .  1949  IMPORTS  1945 T O Dollars)  AND  1963 1  E X P O R T S  IMPORTS  Percent Value 1945 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63  15.55 15.25 15.45 15.75 16.34 17.47 18.55 20.03 20.79 2 0 . 19 21 . 9 2 23.81 2 4 . 12 24.40 25.24 25.85 26.47 28.08 29.38  5.06 4.12 4.14 4.19 4.02 4.00 4.38 4.85 4.81 4.62 4.97 5.34 5.39 5.37 5.57 5.81 6.24 6.52 7 . 10  of G . N . P . 32.6 27.0 26.8 26.6 24.6 22.9 23.6 23.9 23.2 22.9 22.7 22.4 22.4 22.8 23.0 22.5 23.6 23.2 24.2  Percent Value  of G.N.F  3.99 3.72 4.18 3 . 75 3.85 4.21 4.69 4 . 88 5.27 5.01 5 . 74 6.66 6.57 6.15 6.78 6.74 6.85 6.94 7.13  25.6 24.4 27. 1 23.8 23.6 24. 1 25.2 24.4 25.4 24.8 26.2 28.0 27.2 25.2 25.8 25.6 25.9 24. 7 24.3  'M. C U r q u h a r t ; H i s t o r i c a l S t a t i s t i c s of C a n a d a ; M i l l a n C o m p a n y of C a n a d a L t d . , 1 9 6 5 , P a g e 1 3 2 . D o m i n i o n B u r e a u of S t a t i s t i c s ; C a n a d a Y e a r Queen's P r i n t e r , Ottawa, 1965, P a g e 1011.  The  Book,  Mac-  1965,  

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