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Frontier Firms, Productivity Dispersion and Aggregate Productivity Growth in Canada

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  • Wulong Gu

Abstract

Labour productivity growth in the business sector in Canada fell off after 2000. This article examines how innovation, innovation diffusion across firms, and business dynamism affected the productivity slowdown. The article found that both innovation and diffusion of innovation declined in Canada after 2000, contributing to the decline in labour productivity growth in that period. However, their relative contribution to the productivity slowdown is sensitive to the methods adopted. The results from a productivity decomposition into contributions of frontier firms (defined as the top 10 per cent most productive firms in an industry) and non-frontier firms show that the slowdown in the diffusion of innovation is a main source of the productivity slowdown after 2000. In contrast, the results from a stochastic frontier analysis show that the decline in innovation is the main source of the productivity slowdown after 2000. Finally, this article found that resource reallocation declined in Canadian firms after 2000, contributing to the decline in aggregate labour productivity growth in the business sector in that period.

Suggested Citation

  • Wulong Gu, 2019. "Frontier Firms, Productivity Dispersion and Aggregate Productivity Growth in Canada," International Productivity Monitor, Centre for the Study of Living Standards, vol. 37, pages 96-119, Fall.
    • Handle: RePEc:sls:ipmsls:v:37:y:2019:4
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    File URL: http://www.csls.ca/ipm/37/Gu.pdf
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    Cited by:

    1. Jonathan Barr & Peter Foltin & Jianmin Tang, 2023. "Recent Productivity Trends in Canada: Navigating the Twin Transitions of Green and Digitalization," International Productivity Monitor, Centre for the Study of Living Standards, vol. 45, pages 93-119, Fall.
    2. David M. Williams, 2021. "Pay and Productivity in Canada: Growing Together, Only Slower than Ever," International Productivity Monitor, Centre for the Study of Living Standards, vol. 40, pages 3-26, Spring.
    3. Fang, Tony & Xiao, Na & Zhu, Jane & Hartley, John, 2022. "Employer Attitudes and the Hiring of Immigrants and International Students: Evidence from a Survey of Employers in Canada," IZA Discussion Papers 15226, Institute of Labor Economics (IZA).

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