[영문]Over the past 40 years, Australia’s labour productivity level relative to the United States has trended slowlyupwards. However, there remains a substantial gap between productivity levels in Australia and the UnitedStates. The persistence of this gap has raised questions about whether there are factors that might limit theextent to which Australia can catch up to the United States. This paper provides an initial investigation of thelink between distance and labour productivity levels. Parameters of a simple labour productivity equation areestimated for the states of the United States and Australia. This equation includes an indicator that capturesthe size of the economy of the state, the state’s distance to other economies and the size of those other economies.The regressions find that this indicator is a significant determinant of state productivity levels and thatAustralia’s isolation from world economic activity accounts for around 45% of the gap in labour productivitybetween Australia and the United States.