How Does Industrial Policy Impact Output, Hours and Productivity? The Canadian Experience

The article looks at the Canadian experience with industrial policy, and whether those industries that have been the principal focus of industrial policy have performed better than comparable sectors. It outlines the history of industrial policy in Canada and examine the empirical performance of four sectors: steel mills, aluminum smelting, auto assembly and aerospace. It finds that while the aluminum industry has performed better than comparable industries in terms of output, total hours worked and productivity, the same is not true of the other three sectors, which have had a relatively disappointing performance. While the analysis cannot unequivocally prove that industrial policy impact positively or negatively on productivity growth, it acknowledges the possibility that performance could have been worse without such policies. The article also highlights that industrial policy can maintain higher overall productivity by supporting high-productivity industries, preventing their decline.