Output scale, technical change, and productivity in the Canadian pulp and paper industry

Input distance function and index number methods are used to analyze productivity and efficiency in the Canadian pulp and paper industry. Productivity growth is decomposed into components that have different managerial and policy implications. The conventional productivity measures from the study are also compared with environmentally sensitive measures that take into account changes in pollutant outputs. The paper finds that most of the productivity growth indicated by index number methods is due to output scale effects rather than true productivity growth resulting from technical progress or improvements in the degree of productive efficiency. Researchers are advised to employ methods that allow for the identification of different productivity growth components. The results also show that conventional measures that ignore pollution abatement activities understate true productivity growth in the industry.