Accounting for Slower Productivity Growth in the Canadian Business Sector after 2000: The Role of Capital Measurement Issues

Abstract

Labour productivity growth and multifactor productivity (MFP) growth slowed in Canada and other advanced economies after 2000. This article focuses on the issues that are associated with measurement of capital and examines the roles of intangible capital, natural capital, public infrastructure capital and capacity utilization in explaining slower productivity growth. To do that, the article presents an extended growth accounting framework that is used to examine the role of the different types of capital in labour and multifactor productivity growth. It finds that about one quarter of the decline in multifactor productivity growth in the Canadian business sector between 1980-2000 and 2000-2015 was due to an increase in the use of produced capital required to extract natural resources in the oil and gas and mining sector and a decline in the utilization of capital in the manufacturing sector. The decline in labour and multifactor productivity growth after 2000 is not related to intangible capital and public infrastructure capital.

Keywords

• labour productivity
• capital measurement issues
• business sector
• multifactor productivity