and Corrado, a major reason for the slowdown in Canada appears to be diminishing benefits from increasing returns to scale, particularly in manufacturing, whereas in the United States, a major reason appears to be the rising share of the services sector in total output. Although productivity has slowed down in both countries, it would seem that the level of productivity in Canada is not lower than that in the United States, contrary to what is commonly believed.
             Between 1961 and 1992, aggregate labor productivity actually grew faster in Canada than in the United States (see Table 1). This could be due to the fact that during this period, investment rates were higher in Canada than in the United States. With relatively more capital, all other things being equal, Canadian workers became more productive. Faster total factor productivity (TFP) growth in Canada also contributed to faster labor productivity growth (see Table 2). The slowdown of labor productivity and TFP growth in 1973-92, compared with 1961-73, was more severe in Canada than in the United States, as shown in Table 2. During the later period, however, labor produc
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