FP-14 Canada’s Productivity Challenge: The Hidden Costs of Resource Abundance and U.S. Dependence

Canada’s productivity is lagging behind that of the U.S. and other advanced economies. Between 2001 and 2021, labour productivity increased by 19 percentage points less in Canada than in the U.S. (Gu and Willox, 2023), coinciding with a decline in investment per worker (Gu, 2024). A lack of competition, along with various constraints such as heavy regulation and interprovincial trade costs, is frequently cited to explain the productivity lag of Canadian firms (Rogers, 2024). This note proposes a different perspective: while abundant natural resources and privileged access to the U.S. market are often seen as key economic strengths for Canada, we examine how these very advantages may also act as constraints on productivity growth.