Firm Dynamics in New Zealand: A Comparative Analysis with OECD Countries

New Zealand Treasury Working Paper 04/11

Published: September 2004

Authors: Duncan Mills and Jason Timmins

Abstract

Previous work has suggested that New Zealand’s firm dynamics and business demographics show a high proportion of small firms, small average firm size, and high rates of firm and employment turnover by comparison with other OECD countries. This paper reports on new comparative analyses of New Zealand’s firm dynamics and business demography that attempt to control for measurement differences, using data from Statistics New Zealand’s Business Demographic Statistics database, the OECD firm-level project, and the OECD’s analysis of the Eurostat database. The variables investigated include firm size, firm turnover (entry and exit) rates, employment turnover rates, firm survival rates, and firm growth. The findings suggest that once measurement differences are taken into account, overall New Zealand’s firm dynamics and demographics are broadly similar to many other OECD countries. Potential policy implications of these findings are discussed.

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Abstract Table of Contents List of Tables List of Figures 1 Introduction 2 Measurement issues in firm dynamics 2.1 New Zealand studies 2.2 Measurement issues 3 Description of data 3.1 New Zealand data – the Business Demographic Statistics database 3.2 International data 4 Data issues and cross-country differences 4.1 Sector coverage 4.2 Sample period 4.3 Measure of employment 4.4 Unit of analysis – plant versus enterprise 4.5 Threshold for inclusion of a firm in the database 4.6 Definition of firm entry and exit 4.7 One-year firms 4.8 Addressing measurement differences 5 Main findings 5.1 Firm size 5.2 Size of entering and exiting firms 5.3 Firm turnover (entry and exit) rates 5.4 Employment turnover rates 5.5 Firm survival rates 5.6 Firm growth 6 Conclusions and policy implications References Appendix	twp04-11.pdf (342 KB) pp. 37
List of Tables Table 1 – Proportion of firms with less than 20 employees, NZ and OECD firm project data Table 2 – Proportion of employment in firms less than 20 employees, NZ and OECD firm project data Table 3 – Average number of employees per firm, NZ and OECD firm project data Table 4 – Firm size indicators in manufacturing sector, NZ and OECD firm project data Table 5– Firm size indicators, business services sector, NZ and OECD firm project data Table 6 – Distribution of firms by size, NZ and Eurostat data Table 7 – Distribution of firms by size, NZ, USA and UK – private sector Table 8 – Distribution of employment by firm size, NZ, USA and UK – private sector Table 9 – Distribution of firms and employment by firm size, NZ and Australia – private sector Appendix Table 1 – Key data characteristics – New Zealand BDS, OECD firm-level project, and Eurostat data
List of Figures Figure 1 – Size of entering firms relative to incumbent firms, NZ and OECD firm project data Figure 2 – Size of exiting firms relative to incumbent firms, NZ and OECD firm project data Figure 3 – Firm turnover (entry and exit) rates, NZ and OECD firm project data, annual average Figure 4 – Employment turnover due to firm entry and exit, NZ and OECD firm project data, annual average Figure 5 – Firm survival rates at different lifetimes, NZ and OECD firm project data Figure 6 – Employment growth of surviving firms, NZ and OECD firm project data Figure 7 – Employment growth of surviving firms at two years following birth, NZ and Eurostat data

Browse section/chapter

Download/Page range

Abstract

List of Tables

List of Figures

1 Introduction

2 Measurement issues in firm dynamics

3 Description of data

4 Data issues and cross-country differences

5 Main findings

6 Conclusions and policy implications

References

Appendix

twp04-11.pdf (342 KB) pp. 37

List of Tables

List of Figures

Acknowledgements

We would like to thank Geoff Lewis and Bob Buckle for their input on this paper. Findings from the paper have also been presented to the NZ Association of Economists’ Conference and to the Workplace Productivity Working Group, and we are grateful for the comments received from participants and working group members.

Disclaimer

The views, opinions, findings, and conclusions or recommendations expressed in this Working Paper are strictly those of the author(s). They do not necessarily reflect the views of the New Zealand Treasury. The New Zealand Treasury takes no responsibility for any errors or omissions in, or for the correctness of, the information contained in this Working Paper. The paper is presented not as policy, but to inform and stimulate wider debate.

Access to the data used in this Working Paper was provided by Statistics New Zealand under conditions designed to give effect to the security and confidentiality provisions of the Statistics Act 1975. The results presented in this Working Paper are the work of the authors, not Statistics New Zealand.

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Firm Dynamics in New Zealand: A Comparative Analysis with OECD Countries

Abstract

Table of Contents

Abstract

Table of Contents

List of Tables

List of Figures

1 Introduction

2 Measurement issues in firm dynamics

3 Description of data

4 Data issues and cross-country differences

5 Main findings

6 Conclusions and policy implications

References

Appendix

List of Tables

List of Figures

Acknowledgements

Disclaimer