Partnering for Investment in Canada’s future

Released January 2004

In the special report, Partnering for investment in Canada’s prosperity, the Institute concludes that Canadians have created one of the most successful economies in the world, second highest among countries with half of Canada’s population or greater. However, our GDP per capita trails the United States by $6,300 (Canadian) - the 15 percent prosperity gap.  Productivity is the source of the prosperity gap.  The Institute noted that Canadians are not creating as much value as we should from the country’s endowment of human, physical, and natural resources.

The report finds Canadian are under-investing:

−    Canadian businesses invest about 12 percent less in machinery, equipment, and software, which are critical drivers of productivity and innovation.

−    Spending on education by all Canadians is much lower than in the US, especially in higher education; and students’ aspirations for educational attainment are lower than in the US.

−    Governments at all levels in Canada have shifted more spending away from areas of investment, such as education and infrastructure, toward areas that consume current prosperity, such as health care and social services.

−    We under invest in processes to integrate immigrants into our economy, even though immigration gives Canada a skills advantage over the US.

−    Through governance and fiscal structures we are under investing in our cities.

The Institute’s recommendations are aimed at escaping the under investment trap in capital, education, immigration, and cities. They emphasize how Canadian individuals, businesses, and governments can work together as partners in investing for prosperity.

The Institute’s research also concludes that higher tax burdens, especially on capital investment, are an important factor in Canada’s under investment.  While analyses done in Ontario indicate Canada’s tax burden has been declining, it has fallen even faster in the US. The Institute concludes that this has dampened capital investment and recommends exploring opportunities for tax reform.

Topics: Economic policy, growth, and strategy, Government investment and innovation, Business growth and innovation, Clusters, Social policy