Say that the average worker in Canada has a productivity level of $30 per hour while the average worker in the United Kingdom has a productivity level of $25 per hour (both measured in U.S. dollars). Over the next five years, say that worker productivity in Canada grows at 1% per year while worker productivity in the UK grows 3% per year. After five years, who will have the higher productivity level, and by how much?

How can cultural aspects affect the level of a country’s potential GDP? For example, why might two countries with similar natural resources, education levels, technology, and capital per worker have significantly different levels of potential GDP?