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Firm Productivity Growth and Skill

Author

Listed:
  • David C Maré

    (Motu Economic and Public Policy Research)

  • Dean R Hyslop

    (Motu Economic and Public Policy Research)

  • Richard Fabling

    (Independent Researcher)

Abstract

This paper examines the relationship between firm multifactor productivity growth (mfp) and changing skill levels of labour in New Zealand, over the period 2001-12, using longitudinal data from Statistics New Zealand’s Longitudinal Business Database (LBD) and Integrated Data Infrastructure (IDI). We estimate that the average skill of workers declined by 1.8% over the period, reflecting strong employment growth for workers with lower than average skill levels. The net decline was the combined effect of a 3.6% decline in unobserved skill outweighing a 1.8% increase in observed skill, resulting in 1.8% slower estimated skill-adjusted labour growth (13.3%) than the 15.0% growth in full-time equivalent (FTE) employment. Mirroring the skill-dilution, skill-adjusted mfp growth averaged 0.24% per annum over the period compared to 0.14% pa for unadjusted growth. The patterns were stronger over the pre-GFC period to 2008, during which adjusted and unadjusted mfp grew 0.57% pa and 0.42% pa respectively. Our analysis of the effect of changing skill on mfp growth finds that the impact of skill adjustment was almost entirely due to changing skill composition within continuing firms.

Suggested Citation

  • David C Maré & Dean R Hyslop & Richard Fabling, 2015. "Firm Productivity Growth and Skill," Working Papers 15_18, Motu Economic and Public Policy Research.
    • Handle: RePEc:mtu:wpaper:15_18
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    References listed on IDEAS

    as
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    Cited by:

    1. Richard Fabling & David C. Maré, 2016. "Firm-Level Hiring Difficulties: Persistence, Business Cycle And Local Labour Market Influences," Journal of Labor Research, Springer, vol. 37(2), pages 179-210, June.
    2. Paul Conway, 2018. "Can the Kiwi Fly? Achieving Productivity Lift-off in New Zealand," International Productivity Monitor, Centre for the Study of Living Standards, vol. 34, pages 40-63, Spring.
    3. Isabelle Sin & Richard Fabling & Adam B. Jaffe & David C. Maré & Lynda Sanderson, 2014. "Exporting, Innovation and the Role of Immigrants," Working Papers 14_15, Motu Economic and Public Policy Research.
    4. Richard Fabling & David C. Maré, 2019. "Improved productivity measurement in New Zealand's Longitudinal Business Database," Working Papers 19_03, Motu Economic and Public Policy Research.
    5. Adam Jaffe & Nathan Chappell, 2018. "Worker flows, entry, and productivity in New Zealand’s construction industry," Working Papers 18_02, Motu Economic and Public Policy Research.
    6. David C Maré & Trinh Le & Richard Fabling & Nathan Chappell, 2017. "Productivity and the Allocation of Skills," Working Papers 17_04, Motu Economic and Public Policy Research.
    7. Richard Fabling & David C Maré, 2015. "Addressing the absence of hours information in linked employer-employee data," Working Papers 15_17, Motu Economic and Public Policy Research.
    8. Isabelle Sin & Steven Stillman & Richard Fabling, 2017. "What drives the gender wage gap? Examining the roles of sorting, productivity differences, and discrimination," Working Papers 17_15, Motu Economic and Public Policy Research.
    9. David C. Maré, 2016. "Urban Productivity Estimation with Heterogeneous Prices and Labour," Working Papers 16_21, Motu Economic and Public Policy Research.
    10. Fabling, Richard & Maré, David C. & Stevens, Philip, 2022. "Migration and Firm-Level Productivity," IZA Discussion Papers 15482, Institute of Labor Economics (IZA).
    11. Richard Fabling, 2018. "Entrepreneurial beginnings: Transitions to self-employment and the creation of jobs," Working Papers 18_12, Motu Economic and Public Policy Research.
    12. Lynda Sanderson, 2024. "Born in bad times: Economic conditions, selection and employment," Working Papers 2024/01, New Zealand Productivity Commission.
    13. Richard Fabling, 2021. "Living on the edge: An anatomy of New Zealand’s most productive firms," Working Papers 21_01, Motu Economic and Public Policy Research.
    14. Anneleen Vandeplas & Anna Thum-Thysen, 2019. "Skills Mismatch and Productivity in the EU," European Economy - Discussion Papers 100, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    15. Rho, Yeirae & Fabrizi, Simona & Lippert, Steffen, 2021. "Employee characteristics, absorptive capacity and innovation," MPRA Paper 106407, University Library of Munich, Germany, revised 04 Mar 2021.
    16. Guanyu Zheng, 2016. "Geographic proximity and productivity convergence across New Zealand firms," Working Papers 2016/04, New Zealand Productivity Commission.

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    More about this item

    Keywords

    Productivity; reallocation; decomposition; LBD; Linked Employer-Employee Data; firm turnover.;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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