This paper analyzes the productivity performance of the Canadian pulp and paper industry for the 1963–1984 period. The industry's productivity is first measured, then its sources are analyzed. Total factor productivity is used to measure industry productivity, and statistical estimation of neoclassical cost functions are used to determine sources of the productivity changes. In addition to decomposing the productivity changes into technical changes and changing the scale of the industry's output and capacity utilization, an attempt is also made to assess the impact of pollution control expenditures. The paper finds that although labour productivity grew at 2.5% per year (modest in comparison to other industries), the gross total factor productivity grew only by 1.2% per year. This is largely due to the fact that capital investment raises labour productivity but retards overall productivity. Of the 1.2% growth in total factor productivity, 0.88% was due to the increased scale of the industry output and 0.32% to technical change. Although there is no statistically conclusive evidence, the point estimate indicates that pollution control expenditures may have retarded productivity growth. However, this subject requires further investigation.

Logging poses socioeconomic, ecological, and environmental dilemmas. On the one hand, it plays a significant role in sustaining the forest sector’s contributions to the national economy. On the other hand, however, logging operations are major causes of ecological and environmental damages. It was hypothesized that if timely investments in various silvicultural operations were made to restore ecological integrity disturbed by logging operation, if the guiding principles of sustainable forest ecosystem management were strictly upheld, and if public and private investments in research and development were made, with a view to realize technological progress in the forest sector, then logging operations would be technically and economically efficient, firms in each regional industry would have comparative cost advantages in the marketplace, and the adverse effects of logging operations on ecological integrity would be socially, economically, and environmentally tolerable, all reflected through total factor productivity (TFP) growth. Two complementary methodologies were applied to test this hypothesis. First, the guiding principles of sustainable forest ecosystem management were synthesized to establish the conditions and the principles that logging firms must uphold to be stewards of ecological integrity. Second, TFP growth was measured and analyzed, using a nonparametric model. Sluggish but upward trends in TFP growth appeared to validate the hypothesis. Implications of the study for policy making and the benefits that society derives from TFP growth are highlighted.

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