--- canonical_url: "https://csls.ca/ipm-archive/ipm-issue-9/the-effect-of-adjustment-costs-and-organizational-change-on-productivity-in-canada-evidence-from-aggregate-data/" title: "The Effect of Adjustment Costs and Organizational Change on Productivity in Canada: Evidence from Aggregate Data" author: name: "CSLS" url: "https://csls.ca/author/cslc/" date_published: "2026-07-13T06:53:21+00:00" date_modified: "2026-07-13T06:53:21+00:00" post_type: "ipm" summary: "" ipm_issue_period: - "Fall 2004" ipm_keyword: - "adjustment costs" - "aggregate data" - "Canada" - "capital investment" - "ICT" - "lagged effects" - "MFP" - "organizational change" ipm_research_theme: - "Sectoral and firm-level dynamics" ipm_country_focus: - "Canada" - "United States" featured_image: "https://csls.ca/wp-content/uploads/2026/06/IPM_50_banner.webp" status: "publish" --- # The Effect of Adjustment Costs and Organizational Change on Productivity in Canada: Evidence from Aggregate Data Canonical URL: https://csls.ca/ipm-archive/ipm-issue-9/the-effect-of-adjustment-costs-and-organizational-change-on-productivity-in-canada-evidence-from-aggregate-data/ # The Effect of Adjustment Costs and Organizational Change on Productivity in Canada: Evidence from Aggregate Data [Download full PDF article](https://csls.ca/wp-content/uploads/2026/07/IPM-Issue-9-5-Leung.pdf) Cite this article × Cite this article as: Leung, Danny. 2004. “The Effect of Adjustment Costs and Organizational Change on Productivity in Canada: Evidence from Aggregate Data.” International Productivity Monitor, No. 9 (Fall 2004): 52–61. https://www.csls.ca/ipm-archive/ipm-issue-9/the-effect-of-adjustment-costs-and-organizational-change-on-productivity-in-canada-evidence-from-aggregate-data/ ## Author: - Danny Leung Research Branch, Bank of Canada ## IPM Issue 9 Fall 2004 pp. 52–61 ## Related IPM articles [The Relationship between Efficiencies Defenses for Mergers and TFP Growth Robin Shaban Fall 2025 | IPM Issue 49 | pp. 82–102](https://csls.ca/ipm-archive/ipm-issue-49/the-relationship-between-efficiencies-defenses-for-mergers-and-tfp-growth/) [Appendix: Variable Definitions and Country/Sector Coverage for Regulatory Reform Analysis Gilbert Cette, Jimmy Lopez, Giuseppe Nicoletti, Océane Vernerey Fall 2025 | IPM Issue 49 | pp. 1–18](https://csls.ca/ipm-archive/ipm-issue-49/appendix-variable-definitions-and-country-sector-coverage-for-regulatory-reform-analysis/) [The Potential Impact of Pro-competitive Regulatory Reforms on Productivity and Growth in Canada Gilbert Cette, Jimmy Lopez, Giuseppe Nicoletti, Océane Vernerey Fall 2025 | IPM Issue 49 | pp. 3–40](https://csls.ca/ipm-archive/ipm-issue-49/the-potential-impact-of-pro-competitive-regulatory-reforms-on-productivity-and-growth-in-canada/) [IPM Issue 49 Editors’ Overview Andrew Sharpe, Bart van Ark, Paul Schreyer Fall 2025 | IPM Issue 49 | pp. 1–2](https://csls.ca/ipm-archive/ipm-issue-49/) [Using Ecosystem Accounting to Integrate the Environment in Measures of Multifactor Productivity Carl Obst Fall 2024 | IPM Issue 47 | pp. 87–108](https://csls.ca/ipm-archive/ipm-issue-47/using-ecosystem-accounting-to-integrate-the-environment-in-measures-of-multifactor-productivity/) [Eroding Natural Capital: An Alternative Explanation for the Secular Decline in Productivity Growth Christina Caron Fall 2024 | IPM Issue 47 | pp. 109–147](https://csls.ca/ipm-archive/ipm-issue-47/eroding-natural-capital-an-alternative-explanation-for-the-secular-decline-in-productivity-growth/) [How Does Industrial Policy Impact Output, Hours and Productivity? The Canadian Experience Tim Sargent Fall 2024 | IPM Issue 47 | pp. 39–53](https://csls.ca/ipm-archive/ipm-issue-47/how-does-industrial-policy-impact-output-hours-and-productivity-the-canadian-experience/) [Climate Change and Productivity — An Exploration Dirk Pilat Fall 2024 | IPM Issue 47 | pp. 54–86](https://csls.ca/ipm-archive/ipm-issue-47/climate-change-and-productivity-an-exploration/) [Accounting for the Decline of Canada’s Real GDP Per Capita since Mid-2022 Philip Smith Spring 2024 | IPM Issue 46 | pp. 83–100](https://csls.ca/ipm-archive/ipm-issue-46/accounting-for-the-decline-of-canadas-real-gdp-per-capita-since-mid-2022/) [IPM Issue 47 Editors’ Overview Andrew Sharpe, Bart van Ark Fall 2024 | IPM Issue 47 | pp. 1–2](https://csls.ca/ipm-archive/ipm-issue-47/) ## Abstract ## Résumé EN FR Copy link Email LinkedIn This article examines the lagged effects of capital investment on multifactor productivity (MFP) growth in Canada using aggregate data, accounting for both adjustment costs and complementary organizational change. It finds evidence that adjustment costs initially reduce measured MFP growth following investment in new technologies, but that complementary organizational investments — occurring most strongly three years after the initial investment in computer hardware — produce significant productivity gains. The article estimates that the growth of these complementary investment effects can explain approximately one third of Canada’s average annual MFP growth since 1992. Cet article examine les effets différés de l’investissement en capital sur la croissance de la productivité multifactorielle (PMF) au Canada à l’aide de données agrégées, en tenant compte des coûts d’ajustement et des changements organisationnels complémentaires. Il met en évidence que les coûts d’ajustement réduisent initialement la croissance mesurée de la PMF à la suite d’investissements dans de nouvelles technologies, mais que les investissements organisationnels complémentaires — se manifestant le plus fortement trois ans après l’investissement initial en matériel informatique — génèrent des gains de productivité significatifs. L’article estime que la croissance de ces effets d’investissement complémentaires peut expliquer environ un tiers de la croissance annuelle moyenne de la PMF au Canada depuis 1992. [Download full PDF](https://csls.ca/wp-content/uploads/2026/07/IPM-Issue-9-5-Leung.pdf)