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Convergence in Productivity Across Industries: Some Results for New Zealand and Australia

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  • Troy Matheson
  • Les Oxley

Abstract

New Zealand shares a wealth of common interests and experiences with Australia. This has tempted some to assume that these economies form an 'Economic Club', in which one would expect to identify common aggregate trends and growth experiences. In this paper we present results that test, and generally reject, convergence in labour productivity across Australia and New Zealand, using both aggregate and disaggregate, industry-level data. We find that only two industries satisfy our definition of Conditional Convergence (Agriculture, Forestry and Fishing and Cultural and Recreational Services), and that the Mining and Wholesale Trade industries have particularly important roles to play in explaining the measured divergence. Cointegration-based tests reveal more stochastic trends governing Australian productivity than in New Zealand. The evidence suggests, therefore, that the underlying growth processes of the two economies are fundamentally different, thereby questioning the relevance of aggregate comparisons between them. New evidence using industry-level data does not, therefore, resolve the aggregate-level 'non-convergence puzzle' identified here, and elsewhere.

Suggested Citation

  • Troy Matheson & Les Oxley, 2007. "Convergence in Productivity Across Industries: Some Results for New Zealand and Australia," International Review of Applied Economics, Taylor & Francis Journals, vol. 21(1), pages 55-73.
    • Handle: RePEc:taf:irapec:v:21:y:2007:i:1:p:55-73
    DOI: 10.1080/02692170600874143
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    References listed on IDEAS

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    Cited by:

    1. Razzak, Weshah, 2005. "Explaining the gaps in labour productivity in some developed countries," MPRA Paper 1888, University Library of Munich, Germany, revised May 2006.
    2. Razzak, Weshah, 2006. "Explaining the gaps in labour productivity for some developed countries," MPRA Paper 53, University Library of Munich, Germany.
    3. Lavopa, Alejandro, 2011. "The impact of sectoral heterogeneities in economic growth and catching up: Empirical evidence for Latin American manufacturing industries," MERIT Working Papers 2011-075, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).

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