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Explaining the gaps in labour productivity for some developed countries


  • Razzak, Weshah


Modern economic theories explain differences in productivity and economic growth across countries by differences in political and economic institutions, and differences in culture, geographical location, policies, and laws. The success of any of these theories in explaining the gap in productivity between any two countries depends on the countries in the sample. We argue in this paper that differences in the above variables might explain gaps in economic performance between developed and developing countries, but are too small to explain the productivity gaps between developed countries. We test this hypothesis for two pairs of developed neighbouring countries: New Zealand and Australia and Canada and the United States, hence New Zealand – Australia and Canada – United States. In this paper, more than eighty percent of labour productivity gaps between New Zealand and Australia and Canada and the United States are explained by endogenous technology shocks (TFP) and capital intensities.

Suggested Citation

  • Razzak, Weshah, 2006. "Explaining the gaps in labour productivity for some developed countries," MPRA Paper 53, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:53

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    References listed on IDEAS

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    More about this item


    Labour Productivity; TFP; Real exchange rate;

    JEL classification:

    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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