Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/311798 
Year of Publication: 
2024
Series/Report no.: 
Bank of Canada Staff Working Paper No. 2024-49
Publisher: 
Bank of Canada, Ottawa
Abstract: 
Gross domestic product (GDP) per adult in Canada fluctuated between 70% and 90% of that of the United States between 1960 and 2020. Behind this gap lie large, systematic differences in relative incomes across the Canadian and US income distributions. There are small differences in average incomes among lower percentiles of the income distribution while large gaps exist for high-income earners, with larger gaps for business owners and the university-educated. Using data from the World Inequality Database, we find that the top 10% of the income distribution accounts for three-quarters of the gap in GDP per adult between Canada and the United States and up to two-thirds of the measured labour productivity gap. While average hours worked per working-age adult in Canada and the United States were similar in 1970 and 2019, persistent shifts in relative hours worked per adult appear to play a significant role in measured labour productivity differences between 1970 and 2019. Our work suggests that selective emigration of high-ability workers - commonly referred to as brain drain - to the United States may play a significant role in accounting for the gaps in GDP per adult and labour productivity. The lower level of innovative activities in Canada is consistent with larger income gaps for high-income earners.
Subjects: 
Productivity
JEL: 
D31
E24
J24
J61
N12
O47
O51
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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