Current Trends in the Analysis of Canadian Productivity Growth

40 Pages Posted: 26 Sep 2010

See all articles by Simon van Norden

Simon van Norden

HEC Montreal - Department of Finance; CIRANO; University of Montreal - Center for Interuniversity Research in Econometrics

Date Written: August 1, 2010

Abstract

For more than a decade, debates over the impact of new information technologies on trend productivity growth rates have played a key role in the formulation of monetary policy in many countries, including the United States and Canada. However, the question of whether the trend growth rate of aggregate productivity has changed significantly is rarely examined formally. This paper examines the latest aggregate labour productivity data for Canada using a new testing approach specifically designed to detect recent changes in trends. In addition to showing the strength of the evidence for changes in long-run trends, it considers the effect that data revision and changing sample period has had on inference about structural changes. In an appendix, it investigates how large such changes must be before they can be detected and to what degree detection tends to lag the structural change.

Evidence of a decline in the trend rate of labour productivity growth in Canada since 1990 is mixed. In particular, conclusions vary considerably from year to year as data are revised and as the accumulation of observations after purported breaks changes initial perceptions. The instability of test results suggest that policymakers need to use extreme caution in interpreting claims of changes in labour productivity trends and highlight the uncertainty that they face.

Keywords: Productivity growth, detrending, breakpoints, structural change, data revision

Suggested Citation

van Norden, Simon, Current Trends in the Analysis of Canadian Productivity Growth (August 1, 2010). CIRANO - Scientific Publications 2010s-30, Available at SSRN: https://ssrn.com/abstract=1682047 or http://dx.doi.org/10.2139/ssrn.1682047

Simon Van Norden (Contact Author)

HEC Montreal - Department of Finance ( email )

3000 Chemin de la Cote-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada
514-340-6781 (Phone)
514-340-5632 (Fax)

HOME PAGE: http://svannorden.org

CIRANO ( email )

2020 rue University, 25th floor
Montreal H3C 3J7, Quebec
Canada

HOME PAGE: http://svannorden.org

University of Montreal - Center for Interuniversity Research in Econometrics ( email )

C.P. 6128, Succursale Centre-ville
Montreal, Quebec H3C 3J7
Canada

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
22
Abstract Views
350
PlumX Metrics