Explaining The Gaps In Labour Productivity For Some Developed Countries

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. The authors 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. They 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.