Sluggish Productivity Growth in Canada: Could the Urbanization Process Be a Factor?

The purpose of this report is to determine whether urbanization, in and of itself, plays a role in Canada’s productivity performance. Is a higher urban share of total population enough to lift productivity growth? If so, where does Canada stand (based on the literature) compared with other developed nations when it comes to urbanization?

To address this issue, we created a basic econometric model. The results suggest that among developed countries, the change in the capital-to-labour ratio, the level of education, and the geographic size of the country are the most important factors determining productivity growth. That is not to say that these two factors have no effect at all on productivity—but it is clear that in the developed world, neither urbanization nor urban concentration can be considered leading factors in determining productivity growth.