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Toward a Model of Firm Productivity Dynamics

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Author Info
David Law
Bob Buckle
Dean Hyslop () (The Treasury)

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Abstract

A common finding from international research on firm productivity dynamics is that withinfirm productivity dynamics tend to dominate the effects of firm entry and exit on aggregate productivity. The aim of this paper is to explore the suitability of Statistics New Zealand’s Business Demography (BD) and Goods and Services Tax (GST) data as a basis for modelling within-firm productivity dynamics. The paper first analyses and describes the cross-sectional and time-series properties of sales, purchases and a value-added measure of labour productivity. Cross-sectional results reveal a great deal of heterogeneity in average sales, purchases and labour productivity both across and within industries and cohorts. Univariate time-series properties of these variables are remarkably similar and sales and purchases are highly correlated contemporaneously. Transition probabilities are also calculated for movement of firms between quartiles of the labour productivity distribution over varying lengths of time. In order to understand the processes driving the data, a simple statistical model for sales, purchases and value-added per unit of employment is developed to calibrate to the stylised empirical facts. The model does a remarkably good job at mimicking the properties of the BD and GST data.

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File URL: http://www.treasury.govt.nz/publications/research-policy/wp/2006/06-11/twp06-11.pdf
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Publisher Info
Paper provided by New Zealand Treasury in its series Treasury Working Paper Series with number 06/11.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 37 pages
Date of creation: 30 Nov 2006
Date of revision:
Handle: RePEc:nzt:nztwps:06/11

Contact details of provider:
Postal: New Zealand Treasury, PO Box 3724, Wellington, New Zealand
Phone: +64-4-472 2733
Fax: +64-4-473 0982
Web page: http://www.treasury.govt.nz
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Related research
Keywords: Firm Productivity; Labour Productivity; Firm Dynamics; New Zealand GST Data; New Zealand Business Demography; Firm Value-added.;

Find related papers by JEL classification:
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
L00 - Industrial Organization - - General - - - General
O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

References listed on IDEAS
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  1. Duncan Mills & Jason Timmins, 2004. "Firm Dynamics in New Zealand: A Comparative Analysis with OECD Countries," Treasury Working Paper Series 04/11, New Zealand Treasury. [Downloadable!]
  2. David C. Maré & Jason Timmins, 2006. "Geographic concentration and firm productivity," Working Papers 06_08, Motu Economic and Public Policy Research. [Downloadable!]
  3. John Haltiwanger & C J Krizan & Lucia Foster, 1998. "Aggregate Productivity Growth: Lessons From Microeconomic Evidence," Working Papers 98-12, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
    Other versions:
  4. Buckle, R-A & Carlson, J-A, 1996. "Inflation an Asymmetric Price Adjustment," Papers 96-013, Purdue University, Krannert School of Management - Center for International Business Education and Research (CIBER).
  5. Griliches, Zvi & Regev, Haim, 1995. "Firm productivity in Israeli industry 1979-1988," Journal of Econometrics, Elsevier, vol. 65(1), pages 175-203, January. [Downloadable!] (restricted)
  6. Buckle, Robert A & Carlson, John A, 1998. "Inflation and Asymmetric Output Adjustments by Firms," Economic Inquiry, Oxford University Press, vol. 36(2), pages 215-28, April.
  7. Eric J. Bartelsman & Mark Doms, 2000. "Understanding Productivity: Lessons from Longitudinal Microdata," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 569-594, September. [Downloadable!] (restricted)
    Other versions:
  8. Buckle, Robert A & Meads, Chris S, 1991. "How Do Firms React to Surprising Changes to Demand? A Vector Autoregressive Analysis Using Business Survey Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 53(4), pages 451-66, November.
  9. David C. Maré, 2005. "Concentration, Specialisation and Agglomeration of firms in New Zealand," Working Papers 05_12, Motu Economic and Public Policy Research. [Downloadable!]
  10. David Law & Nathan McLellan, 2005. "The Contributions from Firm Entry, Exit and Continuation to Labour Productivity Growth in New Zealand," Treasury Working Paper Series 05/01, New Zealand Treasury. [Downloadable!]
  11. Timothy Dunne & Mark J. Roberts & Larry Samuelson, 1988. "Patterns of Firm Entry and Exit in U.S. Manufacturing Industries," RAND Journal of Economics, The RAND Corporation, vol. 19(4), pages 495-515, Winter. [Downloadable!] (restricted)
    Other versions:
  12. Baily, Martin Neil & Bartelsman, Eric J & Haltiwanger, John, 1996. " Downsizing and Productivity Growth: Myth or Reality?," Small Business Economics, Springer, vol. 8(4), pages 259-78, August.
    Other versions:
  13. Chiara Criscuolo & Jonathan E. Haskel & Matthew J. Slaughter, 2005. "Global Engagement and the Innovation Activities of Firms," NBER Working Papers 11479, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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