--- canonical_url: "https://csls.ca/ipm-archive/issue-1/price-cap-regulation-and-productivity-growth/" title: "Price Cap Regulation and Productivity Growth" author: name: "CSLS" url: "https://csls.ca/author/cslc/" date_published: "2026-07-10T09:12:36+00:00" date_modified: "2026-07-13T06:38:05+00:00" post_type: "ipm" summary: "" ipm_issue_period: - "Fall 2000" ipm_keyword: - "Canada" - "price cap regulation" - "productivity target" - "regulated industries" - "telecommunications" - "TFP" - "X factor" ipm_research_theme: - "Policy and institutions" ipm_country_focus: - "Canada" - "United Kingdom" - "United States" featured_image: "https://csls.ca/wp-content/uploads/2026/06/IPM_50_banner.webp" status: "publish" --- # Price Cap Regulation and Productivity Growth Canonical URL: https://csls.ca/ipm-archive/issue-1/price-cap-regulation-and-productivity-growth/ # Price Cap Regulation and Productivity Growth [Download full PDF article](https://csls.ca/wp-content/uploads/2026/07/IPM-Issue-1-5-Bernstein.pdf) Cite this article × Cite this article as: Bernstein, Jeffrey. 2000. “Price Cap Regulation and Productivity Growth.” International Productivity Monitor, No. 1 (Fall 2000): 23–28. https://www.csls.ca/ipm-archive/issue-1/price-cap-regulation-and-productivity-growth/ ## Author: - Jeffrey Bernstein Department of Economics, Carleton University; National Bureau of Economic Research (NBER) ## IPM Issue 1 Fall 2000 pp. 23–28 ## Related IPM articles [Efficiency Adjustment of Hours Worked: Two Possible Modifications of a Jorgensen Production Model Barbara Fraumeni Fall 2025 | IPM Issue 49 | pp. 103–115](https://csls.ca/ipm-archive/ipm-issue-49/efficiency-adjustment-of-hours-worked-two-possible-modifications-of-a-jorgensen-production-model/) [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/) [Labour Productivity as a Measure of Technological Change Ulrich Kohli Fall 2025 | IPM Issue 49 | pp. 64–81](https://csls.ca/ipm-archive/ipm-issue-49/labour-productivity-as-a-measure-of-technological-change/) [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/) [The UK Productivity Slowdown: A Review of Timing, Magnitude, and Drivers Josh Martin Spring 2025 | IPM Issue 48 | pp. 1–34](https://csls.ca/ipm-archive/ipm-issue-48/the-uk-productivity-slowdown-a-review-of-timing-magnitude-and-drivers/) [Appendix: UK Productivity Growth Rates Across Data Vintages and Studies Josh Martin Spring 2025 | IPM Issue 48 | pp. 65–73](https://csls.ca/ipm-archive/ipm-issue-48/appendix-uk-productivity-growth-rates-across-data-vintages-and-studies/) [Opportunities and Risks of Artificial Intelligence for Productivity Francesco Filippucci, Peter Gal, Katharina Laengle, Matthias Schief, Filiz Unsal Spring 2025 | IPM Issue 48 | pp. 1–26](https://csls.ca/ipm-archive/ipm-issue-48/opportunities-and-risks-of-artificial-intelligence-for-productivity/) [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/) ## Abstract ## Résumé EN FR Copy link Email LinkedIn This article explains how total factor productivity growth is used to set the X factor (offset) in price cap regulation for industries such as telecommunications. The basic guideline is that the X factor should reflect the extent to which a regulated industry achieves faster productivity growth and faces lower input price inflation than the broader economy. The article discusses three key properties of a proper productivity target — industry-wide, long-term, and invariant to manipulation — and shows how the X factor must be adjusted when a regulated firm produces both capped and uncapped services, with a numerical example drawn from Canadian telecommunications regulation. Cet article explique comment la croissance de la productivité multifactorielle (PMF) est utilisée pour fixer le facteur X (correctif) dans la réglementation par plafonnement des prix pour des industries comme les télécommunications. Le principe de base est que le facteur X doit refléter la mesure dans laquelle une industrie réglementée réalise une croissance de la productivité plus rapide et fait face à une inflation des prix des intrants plus faible que l’ensemble de l’économie. L’article examine trois propriétés essentielles d’une cible de productivité appropriée — portée sectorielle, horizon à long terme et imperméabilité aux manipulations — et montre comment le facteur X doit être ajusté lorsqu’une entreprise réglementée produit à la fois des services plafonnés et non plafonnés, avec un exemple numérique tiré de la réglementation des télécommunications canadiennes. [Download full PDF](https://csls.ca/wp-content/uploads/2026/07/IPM-Issue-1-5-Bernstein.pdf)