Working paper

Firm Productivity Growth and the Knowledge of New Workers (WP 22/01)


Linked employer-employee data from New Zealand is used to study the relationship between a firm’s productivity growth and its exposure to outside knowledge through the hiring of new workers with previous work experience. The estimated relationship between productivity growth and hiring is compared to the predictions implied by two different channels: worker quality and knowledge spillover. Although it is not possible to identify a causal relationship, the productivity of a worker’s previous employer is correlated with subsequent productivity growth at the hiring firm. The patterns of this correlation are consistent with both the worker quality and knowledge spillover channels operating simultaneously. Furthermore, if knowledge spillover is occurring, the results suggest the type of knowledge spilling over relates to technological knowledge allowing firms to become more capital intensive, rather than knowledge that improves the efficiency of utilising existing inputs.


These results are not official statistics. They have been created for research purposes from the Integrated Data Infrastructure (IDI) and Longitudinal Business Database (LBD)] which are carefully managed by Stats NZ. For more information about the IDI and LBD please visit The results are based in part on tax data supplied by Inland Revenue to Stats NZ under the Tax Administration Act 1994 for statistical purposes. Any discussion of data limitations or weaknesses is in the context of using the IDI for statistical purposes, and is not related to the data’s ability to support Inland Revenue’s core operational requirements. This research was conducted in 2016 when Michael Kirker was a visiting research at the New Zealand Treasury.


The authors are grateful to Dave Maré, Nairn MacGibbon, Dean Hyslop, and staff at the New Zealand Treasury for their comments on earlier drafts of this work. Michael Kirker would also like to thank Tim Ng and Peter Gardiner for their support and accommodation during his time at the Treasury.