Can a Lack of Pro-Productivity Policies Explain the Secular Decline in Canada's Productivity Growth?

Andrew Sharpe and Stephen Tapp

No 2025-04, CSLS Research Reports from Centre for the Study of Living Standards

Abstract: Over the past half century, Canada’s labour productivity growth has slowed dramatically, falling from 3.7 per cent annually in 1947–73 to less than 1 per cent since 2000. This paper asks whether weak public policy explains that decline and whether new pro-productivity policies could reverse it. Using long-run data and the policy typology of Van Ark et al. (2023), we examine Canada’s record on factor accumulation, technological and structural change, market functioning and resource allocation, and international integration. Our analysis suggests that successive Canadian governments have generally pursued relatively market-oriented, pro productivity reforms — such as liberalizing trade, delivering a stable, predictable inflation environment, modernizing and cutting taxes, and investing in human capital — yet productivity growth continued to falter. The main drivers appear to be declining technological progress and inadequate business investment, not an absence of policy effort. We conclude that, while new policy reforms are desirable and worthwhile (such as easing interprovincial barriers and sharpening competition), they are unlikely to deliver a major revival of Canada’s long-term productivity growth.

Keywords: productivity policy; Canada; secular decline; pro-productivity; technological progress; business investment (search for similar items in EconPapers)
Date: 2025-11
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