Increased multifactor productivity is fundamental to sustain the enhancement of the global socio-economy. Investing in research and development (R&D) is a necessary (but not sufficient condition) to drive innovation leading increasing the value of production from a given quantity of factors of production. Statistics Canada published R&D expenditures by economic sector.

Data is transformed from annual expenditures measured in nominal dollars (tainted by inflation) to share Gross Domestics Expenditure (GDE) averaged per 5-year period. Figure 1 also illustrates 5-year average expenditures by economic sector. Provincial government expenditures includes expenditures by higher education institutions (a provincial responsibility) and the private sector includes private non-profit organizations.

Total R&D expenditures by all sectors rose from 1.32 percent of GDE in 1980-85 to 1.99 percent in the first five years of the 21st century before falling back to the 1.80 percent range. The Canadian Government’s share has fallen from 0.45 percent in the early 1980’s to 0.30 percent by the early 2020’s. Provinces have filled in gap left by the federal withdrawal from R&D expenditures. Any increase has been attributable to the private sector investments.

Canada’s mediocre performance has also been documented by the Organization for Economic Cooperation and Development (OECD). a forum for 37 advanced market based economies. R&D expenditures for member countries are monitored and reported in the OECD Science and Technology Indicators database. Findings for seven selected countries are reported in the following table.

Canada has clearly the most mediocre performance of the selected OECD members.

Observations:

1. Canada is a laggard investor in R&D suggesting that it is a declining contributor supporting global increases in multifactor productivity.
2. The Canadian private sector made a notable increase during the first quarter of this century,
3. The federal government has been reducing its monetary support of greater innovation in the Canadian economy.
4. Provincial governments, with less fiscal ability than the federal government have papered over the reduction of the federal presence.