Thin Capitalization: Weak Business Investment Undermines Canadian Workers

While weakness in the natural resource industries explains some of Canada's disappointing performance, much of that weakness is attributable to policy dysfunctions that governments can and should fix. [...]Canada's lacklustre performance is evident in investment categories that have suffer...

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Bibliographic Details
Published in:Commentary - C.D. Howe Institute 2019-08 (550), p.0_1-23
Main Author: Robson, William B P
Format: Article
Language:English
Subjects:
Canadians
Capital expenditures
Charitable foundations
Conflicts of interest
Economic development
Economic growth
Employment
Infrastructure
Intellectual property
International trade
Investments
Liquefied natural gas
Prime ministers
Productivity
Provinces
Standard of living
Studies
Tax rates
Taxes
Workers
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Summary:While weakness in the natural resource industries explains some of Canada's disappointing performance, much of that weakness is attributable to policy dysfunctions that governments can and should fix. [...]Canada's lacklustre performance is evident in investment categories that have suffered less directly from the resource sector's weak prices and market-access problems. Not all OECD countries break business investment down cy type the way Canada and the US do, and not all measure IPP the same way, so we must use aggregate business investment with less confidence chct we are measuring like with like. [...]no category-specific measures of relative prices like those available for Canada and the US exist, so the bang-per-buck adjustment is less precise: an alternative is to use PPP exchange rates, benchmarked to relative prices of investment goods in 2008. [...]it was up 60 percentage points since early 2017 - a far worse heightening of anxiety than the 9-percentage-point increase worldwide and in the advanced economies generally. Since Canada appears for at least some time to be exposed to protectionist US moves, it makes all the more sense to pursue liberalization with other like-minded partners and follow up recent successes, such as the Canada-EU Trade Agreement and the Trans-Pacific Partnership, with other tradepromotion initiatives. [...]more opportunities to invest in Canadian infrastructure could attract Canadian institutional investors, particularly pension funds, which currently look abroad for assets that match their long-term liabilities (Dachis 2017).
ISSN:0824-8001
1703-0765