2.3  Descriptive statistics

In Figure 1 entry, exit and turnover rates for the aggregate are shown over the period 1995 to 2003.[4] The turnover rate remains reasonably constant over the period, apart from the decline in 2003, and averages around 20%. The entry rate declines steadily over the period while the exit rate rises. This pattern may be owing to a number of factors but is likely to be partly related to institutional changes in New Zealand before and during this period, as well as the business cycle.[5]

Figure 1 – Aggregate entry, exit and turnover rates, 1995-2003

Entry, exit and turnover rates are compared across industries in Table 1. Figures given in this table are arithmetic averages of annual rates for each industry over the period 1995 to 2003. There is considerable variation across industries, especially in the entry rate which varies from just under 7% in mining and quarrying to over 14% in the business services sector. Entry and exit rates are positively correlated across industries. It is interesting to see that those industries which tend to have high costs of entry and/or exit, such as mining and quarrying, tend to have turnover rates below the average for the aggregate. Similarly, industries with low entry and/or exit costs, such as business services, tend to have above average turnover rates.

Notes – All numbers are percentages and are the arithmetic averages of yearly observations between 1995 and 2003.

Figure 2 shows the average weighted labour productivity of entering, exiting and continuing firms respectively over the period 1995 to 2003 where the average labour productivity of entering and exiting firms is expressed relative to the average labour productivity of continuing firms (and has been indexed to 100 in 1995). On average continuing firms have considerably higher labour productivity than both exiting and entering firms, however, these differences decline over the period. Entering and exiting firms’ labour productivity appears to be more variable compared to continuing firms, although this variability in labour productivity also declines over the period.

Figure 2 – Average weighted labour productivity of entering, exiting and continuing firms, 1995-2003

The average weighted labour productivity of entering, exiting and continuing firms are compared across industries in Table 2. Figures given in this table are relative to the average labour productivity for continuing firms (and have been indexed to 100). In all industries except one, entering and exiting firms have lower average labour productivity than continuing firms in their industries. There is considerable variation in labour productivity across industries for all three groups of firms. This is likely to be largely owing to differences in capital intensity between industries. For example, the electricity, gas and water industry has higher labour productivity than all other industries.

Notes – All numbers are relative to the aggregate average continuing firm (whose labour productivity has been indexed to 100) and are the arithmetic averages of yearly observations between 1995 and 2003.

A comparison of Tables 1 and 2 suggests that turnover and labour productivity across industries are negatively correlated. Differences in capital intensity between industries are a possible explanation for this. As the amount of capital used in production increases labour productivity will rise as will the costs associated with entry and exit which should, all else equal, lower turnover. An exception to this pattern is the transport, storage and communications industry which has both high levels of labour productivity and turnover. This may be owing to the mobility of capital in this industry, particularly in the transport sector.