Industry Mix, Plant Turnover and Productivity Growth: A Case Study of the Transportation Equipment Industry in Canada

The transportation equipment industry is one of the few Canadian industries that is as productive as its U.S. counterpart. However, labour productivity growth in the Canadian transportation equipment industry declined from 4.5 per cent per year in 1981-2000 to 1.7 per cent per year in 2000-2007. This article investigates whether restructuring and the reallocation of output and resources within the industry after 2000 contributed to this decline. It shows that the dramatic decline in productivity growth was mainly due to the slowdown in productivity growth in sub-industries, which can largely be traced to the decline in labour productivity growth of continuing plants. Finally, the article shows that even if the Canadian industry mix were the same as the U.S. mix, the productivity growth profile of the Canadian transportation equipment industry would not change.