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Productivity, Capital-Intensity and Labour Quality at Sector Level in New Zealand and the UK

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  • Geoff Mason
  • Matthew Osborne

    ()
    (National Institute of Economic and Social Research)

Abstract

Understanding productivity performance is important to informing policy advice on how to improve productivity and therefore New Zealand's overall economic performance. Given data limitations inherent in international productivity comparisons, this paper is not intended to inform policy in isolation but forms an important element of a wide and expanding body of evidence on the performance of the New Zealand economy. Previous international productivity comparisons involving New Zealand have been confined to the aggregate economy or to broadly-defined sectors such as manufacturing. This paper reports on a New Zealand-UK comparison which distinguishes 21 different ‘market sectors’ (ie, excluding public administration, education, health, property services and some personal, social and community services). It confirms the prevailing consensus that, in aggregate, New Zealand market sectors compare unfavourably with the UK on average labour productivity (ALP) - and by implication compare even more unfavourably with other countries such as the US. However, beneath this overall story there is considerable sectoral variation. While some NZ sectors out-perform the UK on ALP and/or multi-factor productivity (MFP), there is a large group of sectors which fall short of the UK on both productivity measures. Most of these low-productivity sectors are relatively low in physical capital-intensity compared to the UK. Overall, roughly a quarter of the New Zealand-UK gap in ALP for aggregate market sectors in 2002 was attributable to differences in employment structure such as the relatively high shares of New Zealand employment in comparatively low value added sectors such as agriculture. The remaining three quarters of the ALP gap were accounted for by within-sector productivity differences.

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File URL: http://www.treasury.govt.nz/publications/research-policy/wp/2007/07-01/twp07-01.pdf
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Bibliographic Info

Paper provided by New Zealand Treasury in its series Treasury Working Paper Series with number 07/01.

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Length: 56
Date of creation: Mar 2007
Date of revision:
Handle: RePEc:nzt:nztwps:07/01

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Keywords: productivity; capital-deepening; human capital;

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  1. Dale W. Jorgenson, 1991. "Productivity and Economic Growth," NBER Chapters, in: Fifty Years of Economic Measurement: The Jubilee of the Conference on Research in Income and Wealth, pages 19-118 National Bureau of Economic Research, Inc.
  2. Julia Hall & Grant Scobie, 2005. "Capital Shallowness: A Problem for New Zealand?," Treasury Working Paper Series 05/05, New Zealand Treasury.
  3. Dean Hyslop & Dave Mare & Jason Timmins, 2003. "Qualifications, Employment and the Value of Human Capital, 1986-2001," Treasury Working Paper Series 03/35, New Zealand Treasury.
  4. Francis Green, 2001. "It's Been A Hard Day's Night: The Concentration and Intensification of Work in Late Twentieth-Century Britain," British Journal of Industrial Relations, London School of Economics, vol. 39(1), pages 53-80, 03.
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