Has Trend Productivity Growth Increased in Canada?

Abstract

It is still often argued that, in contrast to the United States where labour productivity growth accelerated markedly in the second half of the 1990s, there is no strong evidence of such acceleration in Canada. This paper argues that a significant acceleration in labour productivity growth also occurred in Canada but somewhat later than in the U.S. This view is further examined by estimating Canada’s trend labour productivity growth within a neo-classical growth accounting framework. Our results suggest that trend labour productivity growth has indeed increased steadily since the early 1990s, reaching about 2 per cent in recent years, in line with recent estimates for the United States. This productivity improvement reflects both increased machinery and equipment capital deepening and TFP growth.