اثرات مشوق های مالیاتی در تشکیل سرمایه بلند مدت و رشد بهره وری کل عوامل در صنعت نجاری کانادا

The goal of this study was to analyze effects of tax incentives on long-run dynamics of total factor productivity (TFP) growth and capital formation in the Canadian sawmilling industry over a 40-year period (1961–2000). Simulated tax incentives involved increasing capital cost allowance and investment tax credit and reducing corporate income tax. The production technology was specified as a function of capital, labor, energy, sawlogs, and a time dependent technological progress variable. A translog multilateral index number model was applied to measure and analyze TFP. Two analytical phases were followed. In the first phase, without the tax incentives, we analyzed annual levels and growth rates of TFP1; and parametrically examined effects of output growth and time dependent technology on the growth of TFP1. Over the study period, the average annual growth rate of TFP1 was 2%; and the parametric results revealed that the marginal effects of each of output growth and technological progress on TFP1 growth were highly significant. The second phase involved recalculation of the rental price of capital to estimate effects of the simulated tax incentives on capital formation and growth of TFP (= TFP2). As expected, the average annual share of capital in total cost with the tax incentives rose to 12% from 9% without the tax incentives. The average annual capital intensity also rose to real $15,263.70 with the incentives from real $10,402.91 without the incentives. Most importantly, higher capital formation, motivated by the tax incentives, raised aggregate quantity of the inputs significantly, leading to a slightly lower TFP2 than TFP1, because output was unchanged. In short, the data validated the hypothesis that tax incentives do indeed spur capital formation and TFP growth.

1.1. The Canadian forest products sector: an overview of its importance In 2005 the forest products sector accounted for 3% of Canada's GDP; contributed $31.9 billion to Canada's trade balance; employed a total of 864,000 persons (a total of direct, indirect, and induced); and more than 300 rural and remote communities were identified as dependent on the sector's operations (Canadian Forest Service, 2006b). The sawmilling industry dominates the Canadian forest products sector in many ways. The dramatic increase in the amount of timber harvested for lumber, the industry's principal product, shows prominence of the sawmilling industry. Utilization of sawlogs for lumber jumped from 32.60 million m3 in 1940 to 164.4 million m3 in 2002, while harvest for the other three end-uses, namely: pulpwood, fuelwood, and special uses, declined steadily (Fig. 1).1.2. Challenges Frequent industrial restructuring measures that involved industrial relocation and consolidation through mergers, acquisitions, plant closures, and workforce layoffs indicated that market and non-market forces challenged productivity performance of the Canadian sawmilling industry over the years. National organizations, such as the Canadian Chamber of Commerce (CCC) (2004) and the Forest Products Association of Canada (2006), attribute the industry's challenges to the national taxation policy prescriptions that raised capital cost. High marginal tax rates on individual income and savings; high effective tax rates on capital for corporate investments; withholding taxes on income paid to non-resident investors; low capital cost allowance that does not take into account the economic life- of a capital asset; and lack of investment in research and development (R&D) were identified as the main causes of total factor productivity (TFP) decline in Canada (CCC, 2004). Other sources of challenge that are mentioned in public policy papers and the press include: new sources of timber supply from low cost, fast growing plantations in the Southern Hemisphere; higher productivity levels achieved by Canada's traditional competitors in the marketplace; and technological advances in producing specialized, engineered products, such as aluminum, composite material, and plastic products that are substitutes for solid wood products. Under these challenging circumstances, therefore, TFP growth is a vital driving force of the industry's competitiveness. In addition, society gains multiple benefits from TFP growth. Several of the societal gains are identified in the conclusions and policy implications section (Section 6). 1.3. Goal, hypothesis, specific procedural steps, and organization of the paper The goal of this study is to analyze effects of tax incentives on the long-run capital formation and on TFP growth in the Canadian sawmilling industry over a 40-year period (1961–2000). It is hypothesized that tax incentives would raise the demand for capital stock by reducing its rental price, leading to enhanced capital formation and TFP growth. To test the hypothesis, we follow the following four steps: First, calculate gross TFP without the tax incentives. Second, assess the effects of output growth and time dependent technological progress on the growth rate of TFP without tax incentives. Third, analyze the combined effect of raising capital cost allowance (CCA) and investment tax credit (ITC) and reducing corporate income tax (CIT) on capital formation and TFP growth by recalculating the rental price of capital and then by re-running the model described in Section 3.3. Forth, compute the difference between the two measures: TFP1, the without tax incentive, and TFP2, the with tax incentive to analyze the gap between these two measures. It is expected that TFP1 would be greater than TFP2, because capital stock increases, while output and the variable inputs of labor, energy, and materials remained unchanged. This leads to a larger aggregate input quantity that absorbs TFP down. Including this introductory section, the paper is organized into six sections. 2 and 4 present highlights of the literature, the theoretical framework, and the data, respectively. The empirical results are reported in Section 5, while Section 6 closes the paper with conclusions and policy implications of the findings.

Results of the first phase showed that the average annual growth rate of TFP1 was 2% over the 40-year study period. But, it fluctuated, exhibiting deep troughs and high peaks. What should be of concern to the industry is that its productivity performance was better in the earlier periods (1960s and 1980s) than in the later years of the 1990s, when it was sluggish. For example, TFP1 declined substantially from average annual growth rate of 3% during the decade of 1981–1990 to a marginal average annual growth rate of roughly 1% during the decade of 1991–2000. Furthermore, a log-linear regression model revealed that elasticity of TFP1 with respect to output was 0.3, implying a 1% increase in output would result in approximately 0.3% growth in TFP1, ceteris paribus.; and the marginal effect of technological progress on the growth of TFP1 was found to be an average annual of 0.62%. Both coefficients were highly significant statistically. Thus, output growth and technological progress played important roles in the growth of TFP. The second phase, which involved analysis of the of effects of raising CCA and ITC and reducing CIT on capital formation and on TFP2 growth, was based on the hypothesis that all three fiscal policy measures would spur capital accumulation that would lead to TFP growth in the long-run. Three outcomes were used to test the hypothesis: (a) a higher share of capital in total cost; (b) a higher intensity of capital in the production technology; and (c) a slightly lower gross TFP2 than TFP1 due to increased real capital stock under fixed aggregate output and the variable inputs of labor, energy, and material. As expected, the average annual share of capital in total cost with the tax incentives rose to 12.3% from 8.6% without the tax incentives over the study period. The .average annual capital intensity also rose to real $15,263.70 with the incentives from real $10,402.91 without the incentives. Most importantly, higher capital formation, motivated by the tax incentives, raised capital stock, which pushed the aggregate quantity of the inputs significantly high, resulting in a slightly lower TFP2 than TFP1. The gap between the two measures ranged from a least average annual rate of 0.3% in the 1960s to 4% in the 1990s. Thus, the data have validated the hypothesis that tax incentives do indeed stimulate capital formation, which enhances TFP. The findings have important policy implications. TFP growth is considered as one of the engines of economic growth. Its importance is manifested through the fact that “it has become a workhorse of empirical economic growth analysis and that it is a closely watched government statistic” (Hulten, 2001). This is because society gains multiple benefits from TFP growth. They include the following: mitigating accelerated depletion of natural resources; minimizing environmental damages caused by industrial operations; saving in the use of the productive services of scarce economic resources, i.e., minimizing consumption of a given input per unit of output; minimizing impacts of inflation on performance of a given economy by off-setting rising wage-rates and other input prices; improving competitiveness of national industries in the global marketplace; and fostering overall national economic growth and stability. In closing, understanding the effects of changes in taxation on capital formation and TFP growth is crucial for explaining the impacts of legislated tax policy instruments on the long-run dynamics of TFP, industrial competitiveness, and economic growth. Our findings reveal that raising capital cost allowance and investment tax credit and reducing corporate income tax are indeed effective incentives that stimulate investment and enhance industrial productivity performance.