1 Introduction
Productivity growth is inextricably linked to economic growth and increases in welfare. As most of the difference in cross-country per capita GDP growth is due to differences in multifactor productivity growth rather than input accumulation (Easterly and Levine, 2002), understanding the evolution and determinants of New Zealand’s productivity is important.
The aims of this paper are to provide aggregate and industry productivity series for the market sector of the New Zealand economy, to give an initial analysis of these series, and to compare the productivity performance of Australia and New Zealand. Furthermore, these series are intended as a basis for ongoing monitoring of New Zealand’s productivity performance and for use in further analyses investigating the evolution, sources and determinants of New Zealand’s productivity growth.
There are a number of approaches to measuring productivity. This paper produces annual aggregate and industry productivity series for the market sector of the New Zealand economy for the period 1988 to 2002, using index number techniques and industry data sourced from Statistics New Zealand (SNZ). Throughout, this paper draws on the techniques from Diewert and Lawrence (1999); the last major study that examined New Zealand’s productivity performance using index number techniques.
The remainder of this paper is structured as follows. Section 2 discusses the index number methodology and the choice of an index number formula. Data sources and construction are discussed in Section 3. Section 4 reports aggregate and industry productivity series and compares these with Diewert and Lawrence (1999) productivity series. Section 4 also discusses some of the limitations of the industry data used in productivity calculations. A comparison of Australia and New Zealand’s productivity performance is provided in Section 5. Section 6 summarises key conclusions and suggests several avenues for further work.
