Abstract
Abstract Canada’s productivity performance has become one of the most hotly debated issues among economists and policymakers. This paper compares the link between economic well-being and productivity in the U.S. and Canada from 1976 to 2020. Median household income is used to proxy standards of living in both countries. Canada’s productivity and standards of living have lagged behind the U.S. over the past 45 years. The decomposition of the median household income, however, shines a light on the differences in institutional and social preferences of the two countries. Canadians have universal healthcare coverage, tuition-free schools, and low-cost colleges and universities. Americans, on the other hand, have a strong national defence and a very productive and dynamic economy that encourages people to achieve their dreams. Due to the differences in social preferences, it is hard to compare the standard of living based on productivity only. In general, Canadians benefit from the government’s social policies and get desirable social outcomes from their taxes.