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Comparing Australian and United States productivity

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  • Jyoti Rahman

    (Treasury, Government of Australia)

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    Abstract

    Despite a series of broad and deep macroeconomic and microeconomic reforms boosting Australia's productivity growth, the level of Australia’s GDP per capita remains well below that of the United States. A continuing gap in the levels of productivity plays a central role in explaining Australia’s GDP per capita relative to the US. This paper reviews various explanations for the Australia-US productivity gap and finds that the productivity gap can at least in part be explained by a combination of: differences in human capital as represented by educational attainment; differences in product and labour market policies; and the geographic and historical context in which the Australian economy operates. Differences in physical capital per worker and industry structures do not appear to be primary explanations for the productivity gap.

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    File URL: http://archive.treasury.gov.au/documents/987/PDF/04_comparing_productivity.pdf
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    Article provided by The Treasury, Australian Government in its journal Economic Roundup.

    Volume (Year): (2005)
    Issue (Month): 2 (June)
    Pages: 27-45

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    Handle: RePEc:tsy:journl:journl_tsy_er_2005_2_2
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    Keywords: gross domestic product; human capital; microeconomics; productivity;

    Find related papers by JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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    1. Alan Winters, L. & Martins, Pedro M. G., 2004. "When comparative advantage is not enough: business costs in small remote economies," World Trade Review, Cambridge University Press, vol. 3(03), pages 347-383, November.
    2. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
    3. Lucia Foster & John Haltiwanger & C.J. Krizan, 2002. "The Link Between Aggregate and Micro Productivity Growth: Evidence from Retail Trade," NBER Working Papers 9120, National Bureau of Economic Research, Inc.
    4. Gordon, Robert J, 2004. "Why Was Europe Left at the Station when America's Productivity Locomotive Departed?," CEPR Discussion Papers 4416, C.E.P.R. Discussion Papers.
    5. Robert Ewing & Bryn Battersby, 2005. "Measuring recent trends in Australia’s economic remoteness," Economic Roundup, The Treasury, Australian Government, issue 1, pages 21-31, March.
    6. Chad Syverson, 2004. "Market Structure and Productivity: A Concrete Example," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1181-1222, December.
    7. Stephen Redding & Anthony J. Venables, 2002. "The Economics of Isolation and Distance," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 28, pages 93-108.
    8. Bryn Battersby, 2006. "Does distance matter?: The effect of geographic isolation on productivity levels," OECD Economic Studies, OECD Publishing, vol. 2006(1), pages 205-225.
    9. Ian W. McLean & Alan M. Taylor, 2001. "Australian Growth: A California Perspective," NBER Working Papers 8408, National Bureau of Economic Research, Inc.
    10. Paul Conway & Véronique Janod & Giuseppe Nicoletti, 2005. "Product Market Regulation in OECD Countries: 1998 to 2003," OECD Economics Department Working Papers 419, OECD Publishing.
    11. Lewis Evans and Patrick Hughes, 2003. "Competition Policy in Small Distant Open Economies: Some Lessons from the Economics Literature," Treasury Working Paper Series 03/31, New Zealand Treasury.
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    Cited by:

    1. Gene Tunny, 2006. "Educational attainment in Australia," Economic Roundup, The Treasury, Australian Government, issue 2, pages 1-9, May.
    2. Ben Dolman & Lan Lu & Jyoti Rahman, 2006. "Understanding productivity trends," Economic Roundup, The Treasury, Australian Government, issue 1, pages 35-52, March.

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