4.2  Disaggregated industry results

There is likely to exist a great deal of heterogeneity across firms in terms of both production processes and outputs produced within the eight industries examined in the previous section. It is possible that this heterogeneity is driving results rather than genuine labour productivity differences between entering, exiting and continuing firms. To guard against this possibility analysis is now conducted at a much lower level of aggregation where differences across firms’ production processes and outputs within industries should be less marked. For confidentiality reasons it is not possible to show individual industry decompositions at a lower level of aggregation than in the previous section. However, it is possible to summarise these results.

Table 7 gives the percent of 3-digit industries that made positive and negative contributions to the various GR decomposition components on average over the period 1995 to 2003. Industries where a decomposition component was zero in any given year (due to no entries or exits occurring in that year) were excluded. Thus, out of 152 possible industries, results are summarised for 117 of these.

These results are similar to the aggregate and industry results of the previous section. For most industries the exit component is generally adding to labour productivity growth while the entry component is generally subtracting from labour productivity growth. The within component for around two thirds of industries is positive. The between component for most industries is also positive, in contrast to the aggregate results of the previous section.

Notes – All numbers are percentages and are the arithmetic averages of yearly observations between 1995 and 2003. These percentages are based on 117 industry observations.

Table 8 gives the percent of 3-digit industries observations that made positive and negative contributions respectively to the various GR decomposition components for each of the years 1995 to 2003. In other words Table 8 differs from Table 7 in that there are now 9 yearly observations for each of 117 industries instead of only one average observation for each of 117 industries. These results are similar to those above except there are now a smaller proportion of positive contributions to the within and between components. This suggests that the magnitude of observations with positive contributions to the within and between components tend to be greater than those with negative contributions.

The OECD produces a similar table for the manufacturing and business services sectors of a number of countries in OECD (2004: 77). The New Zealand results presented in this paper are similar to most other countries with regard to the exit and between components. Where New Zealand differs is in the entry component with most other countries having large proportions of positive entry components, the United States being the only exception.

Notes – All numbers are percentages and are based on 1053 observations.