Productivity Growth in Canada and the United States: Recent Industry Trends and Potential Explanations

Abstract

Labour productivity growth in Canada was weaker than that in the United States from the mid-1980s to 2010, leading to a decline in Canada’s relative productivity level. This situation was mainly due to the lower multifactor productivity (MFP) growth experienced in most Canadian industries in that period. After 2010, however, the pattern reversed itself as labour productivity growth in Canada exceeded that of the United States. Higher labour productivity growth in Canada for the 2010-2014 period was due to a relatively larger capital deepening effect and relatively higher MFP growth. Both these developments were associated with stronger output growth and stronger demand in Canada. In addition, the contributions of ICT producing and ICT intensive using industries to U.S. labour productivity growth waned after 2010. For Canada, ICT producing industries contributed little to overall labour productivity before and after 2010, while ICT intensive using industries exhibited stronger productivity growth after 2010. The latter may reflect the more moderate ICT investment in Canada compared to the United States in the 1990s and early 2000s and the more gradual realization of benefits of ICT usage.

Keywords

• labour productivity
• multifactor productivity
• industry trends
• ict