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Why are Americans More Productive than Canadians?

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  • Andrew Sharpe

Abstract

Historically, per capita income in the United States has exceeded those in Canada and this difference has reflected higher labour productivity levels south of the 49th parallel. In this article, Andrew Sharpe of the Centre for the Study of Living Standards provides estimates of the size of the gap in aggregate labour productivity between the United States and Canada and discuss possible explanation of the gap. He points out that based on average weekly hours estimates from the U.S. household survey, total economy output per hour in Canada in 2002 was 89 per cent of the U.S. level, compared to 81 per cent using estimates from the establishment survey. Sharpe concludes that the Canada-U.S. aggregate labour productivity gap reflects Canada's lower capital intensity of production, an innovation gap manifested by lower R&D expenditure, a smaller and less dynamic high tech sector, less developed human capital at the top end of the labour market, and more limited economies of scale and scope.

Suggested Citation

  • Andrew Sharpe, 2003. "Why are Americans More Productive than Canadians?," International Productivity Monitor, Centre for the Study of Living Standards, vol. 6, pages 19-37, Spring.
    • Handle: RePEc:sls:ipmsls:v:6:y:2003:2
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    References listed on IDEAS

    as
    1. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
    2. John R Baldwin & Ron S Jarmin & Jianmin Tang, 2002. "The Trend to Smaller Producers in Manufacturing in Canada and the U.S," Working Papers 02-06, Center for Economic Studies, U.S. Census Bureau.
    3. Someshwar Rao & Ashfaq Ahmad & William Horsman & Phaedra Kaptein-Russell, 2001. "The Importance of Innovation for Productivity," International Productivity Monitor, Centre for the Study of Living Standards, vol. 2, pages 11-18, Spring.
    4. Robert E. Hall & Charles I. Jones, "undated". "The Productivity of Nations," Working Papers 96012, Stanford University, Department of Economics.
    5. Baldwin, John R. Jarmin , Ron S. Tang, Jianmin, 2002. "The Trend to Smaller Producers in Manufacturing: A Canada/U.S. Comparison," Economic Analysis (EA) Research Paper Series 2002003e, Statistics Canada, Analytical Studies Branch.
    6. Martin Neil Baily & Robert M. Solow, 2001. "International Productivity Comparisons Built from the Firm Level," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 151-172, Summer.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Centre for the Study of Living Standards, 2005. "What Explains the Canada-US ICT Investment Intensity Gap?," CSLS Research Reports 2005-06, Centre for the Study of Living Standards.
    2. Pierre Kohler & Servaas Storm, 2016. "CETA without Blinders: How Cutting “Trade Costs and More” Will Cause Unemployment, Inequality, and Welfare Losses," International Journal of Political Economy, Taylor & Francis Journals, vol. 45(4), pages 257-293, October.
    3. Jean-Francois Arsenault & Andrew Sharpe, 2008. "An Analysis of the Causes of Weak Labour Productivity Growth in Canada since 2000," International Productivity Monitor, Centre for the Study of Living Standards, vol. 16, pages 14-39, Spring.
    4. Someshwar Rao & Jianmin Tang & Weimin Wang, 2003. "Canada's Recent Productivity Record and Capital Accumulation," International Productivity Monitor, Centre for the Study of Living Standards, vol. 7, pages 24-38, Fall.
    5. Baldwin, John R. Maynard, Jean-Pierre Tanguay, Marc Wong, Fanny Yan, Beiling, 2005. "Comparaison des niveaux de productivité au Canada et aux États-Unis : étude de certains aspects de la mesure," Série de documents de recherche sur l'analyse économique (AE) 2005028f, Statistics Canada, Direction des études analytiques.
    6. Wulong Gu & Michael Willox, 2018. "Productivity Growth in Canada and the United States: Recent Industry Trends and Potential Explanations," International Productivity Monitor, Centre for the Study of Living Standards, vol. 35, pages 73-94, Fall.
    7. Jeremy Smith, 2004. "Assessing Aggregate Labour Productivity Trends in Canada and the United States: Total Economy versus Business Sector Perspectives," International Productivity Monitor, Centre for the Study of Living Standards, vol. 8, pages 47-58, Spring.
    8. Heisz, Andrew & Larochelle-Cote, Sebastien, 2007. "Understanding Regional Differences in Work Hours," Analytical Studies Branch Research Paper Series 2007293e, Statistics Canada, Analytical Studies Branch.
    9. Jeremy Smith, 2004. "Aggregate Labour Productivity Growth in Canada and the United States: Definitions, Trends and Measurement Issues," CSLS Research Reports 2004-04, Centre for the Study of Living Standards.
    10. Lin Shao & Rongsheng Tang, 2021. "Allocative Efficiency and Aggregate Productivity Growth in Canada and the United States," Staff Working Papers 21-1, Bank of Canada.
    11. Andrew Sharpe, 2004. "Ten Productivity Puzzles Facing Researchers," International Productivity Monitor, Centre for the Study of Living Standards, vol. 9, pages 15-24, Fall.

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    More about this item

    Keywords

    Productivity; Canada; United States; Employment; Hours; Hours of Work; Capital; International Comparisons; Purchasing Power Parity; Labour Productivity Gap; Level Gap; Alternative Data Sources;
    All these keywords.

    JEL classification:

    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • C80 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - General

    Statistics

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