An Analysis of the Labour Productivity Growth Slowdown in Canada since 2000
After accelerating in the second half of the 1990s, aggregate labour productivity growth in Canada has fallen off significantly since 2000. This paper examines the factors behind this development, which is puzzling given the recent acceleration of productivity growth in the United States and the apparent strength of most productivity drivers in Canada. Factors that may have contributed to the post-2000 productivity growth slowdown include: the weakness of information and communications technologies (ICT) manufacturing; the slower growth of machinery and equipment (M&E) investment; slower economic growth; and higher commodity prices. But the authors argue that in recent years Canada has suffered no major macroeconomic shock (excluding exchange rate shocks) and has undergone no policy development or reorientation that would have significantly impeded productivity growth. In addition, the pick-up in U.S. productivity growth after 2000, which appears to be related to the faster pace of technological change, may augur well for a return to stronger productivity growth in this country. Yet they note that the dangers of complacency are very real. They conclude by pointing out that future trends in productivity in Canada are largely in the hands of the private sector. Nevertheless, Canadian governments can faciliatate productivity-enhancing investments by fostering a highly competitive business climate.
Volume (Year): 10 (2005)
Issue (Month): (Spring)
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