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Capital Shallowness: A Problem for New Zealand? - WP 05/05

2.2  Total Hours Worked

The OECD has data on average hours worked and total employment. We multiplied these two series to form Total Hours Worked, and used this in the measurement of labour productivity and the capital-labour ratio. Alternatively we could have used total employment to calculate labour productivity and the capital-labour ratio, but we preferred to use total hours worked as it allows for changes over time in the hours worked per person employed. For example, if average hours worked per person employed is trending downwards, using a simple measure of persons employed would lead to an overestimate of the quantity of labour input.

The data available from the OECD on average hours worked for New Zealand starts in 1987. We thus used the Household Labour Force Survey (HLFS) series on Total Hours Worked for New Zealand instead of the OECD data, backdated by Chapelle and Mears (1995) to 1978. As shown in Figure 4, the OECD series and the HLFS series are very similar.

Figure 4: Estimates of the total hours worked in New Zealand using different data sources: 1978-2003
Estimates of the total hours worked in New Zealand using different data sources: 1978-2003
Source: OECD and Statistics New Zealand.

In this paper we do not attempt to adjust for quality in the measure of labour input (or in our measure of the capital stock). For examples of these adjustments see the IMF Country Report (2002) and Caselli (November 2003).

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