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Productivity dispersion and firm growth in Canada

Author

Listed:
  • Jangho Yang

    (University of Waterloo
    Institute of New Economic Thinking, University of Oxford)

  • Brian Cozzarin

    (University of Waterloo)

  • Torsten Heinrich

    (Institute of New Economic Thinking, University of Oxford
    Chemnitz University of Technology)

Abstract

This study examines whether the growing disparity in labor productivity between firms in Canada is associated with the ability of these firms to grow in the Canadian economy. Using Canada’s Corporate Tax Statistics Universal File, we identify an inverted U-shaped relationship between labor productivity and fixed-asset growth rates, which subsequently results in a negative association between growing dispersion and lower growth rates. Econometric analyses reveal that a 1% increase in productivity dispersion leads to a 0.06 percentage point reduction in industry-level growth rates. We consider Schumpeterian and other evolutionary approaches for explaining this phenomenon and propose a simple population dynamics model.

Suggested Citation

  • Jangho Yang & Brian Cozzarin & Torsten Heinrich, 2025. "Productivity dispersion and firm growth in Canada," Journal of Evolutionary Economics, Springer, vol. 35(1), pages 35-70, January.
    • Handle: RePEc:spr:joevec:v:35:y:2025:i:1:d:10.1007_s00191-025-00891-z
    DOI: 10.1007/s00191-025-00891-z
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    More about this item

    Keywords

    Labor productivity; Dispersion; Fixed-asset growth;
    All these keywords.

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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