The Potential Impact of Procompetitive Regulatory Reforms on Productivity and Growth in Canada

This article explores how regulations that restrict competition in key Canadian nonmanufacturing sectors such as energy, transport, trade, and professional services have contributed to the country's long-standing productivity gap with the United States. Using international data on anticompetitive regulations and productivity from 15 countries and a large number of industries over the 1996-2021 period, the study finds that regulation in these upstream sectors, which supply essential inputs to the rest of the economy, plays a role in shaping overall productivity performance. Taking results causally, a thought experiment suggests that if Canada were to implement an ambitious reform effort aimed at adopting best international practices in regulating these four sectors, GDP per capita could rise in the long term by between 6.5 and 10 percent, depending on the range of reforms implemented. Gains would originate from procompetitive reforms in all sectors, with the largest ones coming from the professional services and retail distribution. Overall, the findings highlight the major economic benefits Canada could reap from implementing a deeper and swifter pro-competitive reform agenda than in the past.