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An Analysis of the Causes of Weak Labour Productivity Growth in Canada since 2000

  • Jean-Francois Arsenault

    ()

  • Andrew Sharpe

    ()

Since 2000, business sector labour productivity growth in Canada has averaged 0.95 per cent, 0.60 percentage points below the long-term trend established over the 1973-2000 period (1.55 per cent). In the United States productivity growth has continued to be robust beyond 2000, averaging 2.60 per cent per year. This article argues that Canada’s weak productivity growth since 2000 is temporary, and mostly associated with over-hiring and the adjustment costs of moving from a labour surplus to a labour shortage economy. The concentration of weak productivity growth since 2000 in the goods sector, the sector which shouldered the brunt of the structural adjustment, gives additional credence to this explanation. Moreover, most of the increased Canada-US productivity growth gap since 2000 relates to developments south of the 49th parallel. Given that the state of the factors driving productivity growth has not deteriorated in Canada relative to the United States in recent years, it is unlikely that long-term productivity growth in Canada and the United States have decoupled. Indeed, the current widening opens more room for convergence. Future productivity growth in Canada is likely to revert to its 1973-2000 trend.

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Article provided by Centre for the Study of Living Standards in its journal International Productivity Monitor.

Volume (Year): 16 (2008)
Issue (Month): (Spring)
Pages: 14-39

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Handle: RePEc:sls:ipmsls:v:16:y:2008:2
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  1. Andrew Sharpe & Jean-François Arsenault & Simon Lapointe, 2008. "Apprenticeship Issues and Challenges Facing Canadian Manufacturing Industries," CSLS Research Reports 2008-02, Centre for the Study of Living Standards.
  2. 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.
  3. Ravi Balakrishnan, 2008. "Canadian Firm and Job Dynamics," IMF Working Papers 08/31, International Monetary Fund.
  4. 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.
  5. Andrew Sharpe, 2003. "Why Are Americans More Productive Than Canadians?," CSLS Research Reports 2003-03, Centre for the Study of Living Standards.
  6. 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.
  7. Diewert, Erwin, 2008. "Changes in the Terms of Trade and Canada's Productivity Performance," Economics working papers diewert-08-03-11-11-03-49, Vancouver School of Economics, revised 18 Jul 2008.
  8. 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.
  9. Jianmin Tang & Carolyn MacLeod, 2006. "Labour force ageing and productivity performance in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 39(2), pages 582-603, May.
  10. Richard Dion & Robert Fay, 2008. "Understanding Productivity: A Review of Recent Technical Research," Discussion Papers 08-3, Bank of Canada.
  11. Richard Dion, 2007. "Interpreting Canada's Productivity Performance in the Past Decade: Lessons from Recent Research," Bank of Canada Review, Bank of Canada, vol. 2007(Summer), pages 19-32.
  12. Paul Boothe & Richard Roy, 2008. "Business Sector Productivity in Canada: What Do We Know?," International Productivity Monitor, Centre for the Study of Living Standards, vol. 16, pages 3-13, Spring.
  13. Jack M. Mintz, 2007. "2007 Tax Competitiveness Report: A Call for Comprehensive Tax Reform," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 254, September.
  14. Andrew Sharpe, 2007. "Three Policies to Improve Productivity Growth in Canada," CSLS Research Reports 2007-05, Centre for the Study of Living Standards.
  15. Jianmin Tang & Weimin Wang, 2004. "Sources of aggregate labour productivity growth in Canada and the United States," Canadian Journal of Economics, Canadian Economics Association, vol. 37(2), pages 421-444, May.
  16. Andrew Sharpe & Celeste Bradley, 2009. "A Detailed Analysis of the Productivity Performance of Mining in Canada," CSLS Research Reports 2009-07, Centre for the Study of Living Standards.
  17. 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.
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