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An Analysis of the Labour Productivity Growth Slowdown in Canada since 2000

Author

Listed:
  • Someshwar Rao

    ()

  • Andrew Sharpe

    ()

  • Jeremy Smith

    ()

Abstract

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.

Suggested Citation

  • Someshwar Rao & Andrew Sharpe & Jeremy Smith, 2005. "An Analysis of the Labour Productivity Growth Slowdown in Canada since 2000," International Productivity Monitor, Centre for the Study of Living Standards, vol. 10, pages 3-23, Spring.
  • Handle: RePEc:sls:ipmsls:v:10:y:2005:1
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    References listed on IDEAS

    as
    1. Surendra Gera & Wulong Gu, 2004. "The Effect of Organizational Innovation and Information and Communications Technology on Firm Performance," International Productivity Monitor, Centre for the Study of Living Standards, vol. 9, pages 37-51, Fall.
    2. Julie Turcotte & Lori Whewell Rennison, 2004. "The Link between Technology Use, Human Capital, Productivity and Wages: Firm-level Evidence," International Productivity Monitor, Centre for the Study of Living Standards, vol. 9, pages 25-36, Fall.
    3. Andrew Sharpe, 2004. "Recent Productivity Developments in Canada and the United States: Productivity Growth Deceleration versus Acceleration," International Productivity Monitor, Centre for the Study of Living Standards, vol. 8, pages 16-26, Spring.
    4. Someshwar Rao & Jianmin Tang & Weimin Wang, 2004. "Measuring the Canada-U.S. Productivity Gap: Industry Dimensions," International Productivity Monitor, Centre for the Study of Living Standards, vol. 9, pages 3-14, Fall.
    5. Danny Leung, 2004. "The Effect of Adjustment Costs and Organizational Change on Productivity in Canada: Evidence from Aggregate Data," International Productivity Monitor, Centre for the Study of Living Standards, vol. 9, pages 52-61, Fall.
    6. Baldwin, John R. & Chowhan, James, 2003. "The Impact of Self-employment on Labour-productivity Growth: A Canada and United States Comparison," Economic Analysis (EA) Research Paper Series 2003016e, Statistics Canada, Analytical Studies Branch.
    7. Centre for the Study of Living Standards, 2004. "Report on Productivity Trends in Selected Natural Resource Industries in Canada," CSLS Research Reports 2004-06, Centre for the Study of Living Standards.
    8. Jeremy Smith, 2004. "Assessing Aggregate Labour Productivity Trends in Canada and the United States: Total Economy versus Business Sector Perspectives," International Productivity Monitor, Centre for the Study of Living Standards, vol. 8, pages 47-58, Spring.
    9. Kaci, Mustapha & Maynard, Jean-Pierre, 2005. "Canada/U.S. Labour Productivity Revisions in the Business Sector," Economic Analysis Methodology Paper Series: National Accounts 2005003e, Statistics Canada, Economic Analysis Division.
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    Citations

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    Cited by:

    1. Robert Inklaar & Marcel P. Timmer & Bart van Ark, 2007. "Mind the Gap! International Comparisons of Productivity in Services and Goods Production," German Economic Review, Verein für Socialpolitik, vol. 8, pages 281-307, May.
    2. Marcello M. Estevão & Evridiki Tsounta, 2010. "Canada's Potential Growth; Another Victim of the Crisis?," IMF Working Papers 10/13, International Monetary Fund.
    3. Richard Dion & Robert Fay, 2008. "Understanding Productivity: A Review of Recent Technical Research," Discussion Papers 08-3, Bank of Canada.
    4. Ricardo de Avillez, 2011. "A Detailed Analysis of the Productivity Performance of the Canadian Primary Agriculture Sector," CSLS Research Reports 2011-06, Centre for the Study of Living Standards.

    More about this item

    Keywords

    Productivity; Productivity Levels; Canada; United States; Labour Productivity; Productivity Gap; Purchasing Power Parity; Industry; Industry Level;

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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