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The Contributions from Firm Entry, Exit and Continuation to Labour Productivity Growth in New Zealand - WP 05/01

Publication Details

  • The Contributions from Firm Entry, Exit and Continuation to Labour Productivity Growth in New Zealand
  • Published: Apr 2005
  • Status: Current
  • Authors: Law, David; McLellan, Nathan
  • JEL Classification: D21; L00; O12
  • Hard copy: Available in HTML and PDF formats only.
 

The Contributions from Firm Entry, Exit and Continuation to Labour Productivity Growth in New Zealand

New Zealand Treasury Working Paper 05/01

Published March 2005

Authors: David Law and Nathan McLellan

Abstract

This paper evaluates the contributions from firm entry, exit and continuation to labour productivity growth in New Zealand over the period 1995 to 2003. Decomposition techniques developed by Griliches and Regev (1995) and by Foster, Haltiwanger and Krizan (1998) are employed. Results suggest significant heterogeneity across both industries and firms. Most entering firms’ initial level of labour productivity is below the industry average but grows rapidly thereafter. Continuing firms generally add to industry labour productivity growth. On average exiting firms experience stagnant or declining labour productivity in the years leading up to their death, and when they eventually die most have below average labour productivity compared to their industry. This pattern persists even at a highly disaggregated industry level and indicates that firm turnover has positively contributed to labour productivity growth in New Zealand.

Contents

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Abstract

Table of Contents

List of Tables

List of Figures

1 Introduction

2 Firm dynamics and productivity

3 Labour productivity accounting

4 Contribution of firm dynamics to labour productivity growth

5 Reallocation

6 Preliminary life cycle dynamics

7 Discussion and conclusions

References

Appendix 1 – Firm productivity database

Appendix 2 – Additional decompositions

twp05-01.pdf (522 KB) pp. 1–34

List of Tables

List of Figures

Acknowledgements

We would like to thank Bob Buckle, Dimitri Margaritis, Dean Parham, John Gibson, Veronica Jacobson, Adrienne Quach, Dave Maré, Jason Timmons, Dean Hyslop, participants at a presentation given in Treasury’s Economic Growth Seminar Series and to our colleagues in the Policy Coordination and Development Section for their contributions to this paper. We would also like to thank Statistics New Zealand for data access and their advice throughout this project.

Data

Access to the data used in this study was provided by Statistics New Zealand in a secure environment designed to give effect to the confidentiality provisions of the Statistics Act, 1975.

Disclaimer

This document was commissioned by the New Zealand Treasury. However, the views, opinions, findings and conclusions or recommendations expressed in it are strictly those of the author(s), do not necessarily represent and should not be reported as those of the New Zealand Treasury or Statistics New Zealand. The New Zealand Treasury and Statistics New Zealand take no responsibility for any errors, omissions in, or for the correctness of, the information contained in this paper.

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