Public infrastructure leads to private productivity: Statscan

OTTAWA — Over the last 40 or so years, about half of the total growth in all multifactor productivity in the private sector was the result of growth in public infrastructure.

According to Stats Canada, public capital — such as the nation’s roads, bridges, sewer systems — constitutes a vital input for private sector economic production.

"It enables concentrations of economic resources and provides wider and deeper markets for output and employment," says a recent study in the Canadian Productivity Review.

The contribution of public infrastructure to productivity growth has not been constant over time, however. The largest contributions occurred during the 1960s and early 1970s, when it contributed up to 0.4 percentage points to average annual productivity growth. During the 1980s and 1990s, its contribution averaged only 0.1 percentage points a year.

"The slower growth in the stock of public capital after 1980 occurred as decades of cross-country highway expansion came to an end," the report states.

Analysts studying productivity growth have long been faced with the problem of explaining why growth was much higher before 1980 than afterwards.

"A substantial portion of the difference came from the much higher growth in public infrastructure in the period preceding 1980."