Productivity Trends in the Construction Sector in Canada: A Case of Lagging Technical Progress

Both labour and total factor productivity growth in the total and residential construction sectors in Canada have been negative over the past two decades. This report provides a detailed examination of output, employment, and productivity trends in the construction sector in Canada and by province, with particular attention to the residential construction sector. It puts forth a number of variables to explain these trends and tests these explanations in a regression model. In addition, the report looks at other potential explanatory factors for which time series are not available, with particular reference to measurement issues and technical change; discusses the micro- and macro-economic environment affecting productivity performance in the construction sector; examines the prospects for productivity growth in the construction sector; and makes a number of recommendations for future work. The major conclusion is that lagging technical progress appears to lie at the root of the construction sector’s poor productivity performance. In addition, measurement problems have also likely contributed to the poor measured productivity performance in the sector.