The Canadian economy has been facing a continuous decline in productivity growth over the past four decades. The aim of this publication is to explain what productivity growth is and why it matters for improving Canada’s average standard of living. It explores the importance of “new ideas” – a concept coined by the Nobel Laureate Paul M. Romer – in determining Canada’s long-term productivity growth and emphasizes that the long-term growth of an advanced economy like Canada depends largely on the extent to which new ideas are generated and those ideas become innovations that increase productivity. The basic insight emerging from the economic literature is that the long-run growth rate of an advanced economy is primarily the product of the number of researchers, entrepreneurs and scientists and their respective productivity.
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