Why are Americans More Productive than Canadians?

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Abstract

This article examines the long-term gap in aggregate labour productivity levels between the United States and Canada, estimating that total economy output per hour in Canada was 89 per cent of the U.S. level in 2002 using household survey hours data, or 81 per cent using establishment survey data. The article systematically evaluates explanatory factors including capital intensity, innovation and R&D expenditure, high-tech sector size, human capital at the top end of the labour market, and economies of scale and scope. It concludes that Canada’s lower capital intensity and innovation gap are the primary drivers of the persistent productivity level gap.

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