Boulhol, H., A. de Serres, and N. Yashiro, “An International Perspective on the New Zealand Productivity Paradox,” New Zealand Productivity Commission Working Paper 2014/01
Boulhol, H. and A. de Serres, “Have Developed Countries Escaped the Curse of Distance?,” Journal of Economic Geography 10 (2010)
Mason, G., “Investigating New Zealand-Australia Productivity Differences: New comparisons at industry level,” New Zealand Productivity Commission Working Paper 2013/02
New Zealand Treasury, “Investment, Productivity, and the Cost of Capital: Understanding New Zealand’s “Capital Shallowness””, Productivity Paper 08/03
Razzak, Weshah, “An Empirical Study of Sectoral Level Capital Investments in New Zealand,” New Zealand Treasury Working Paper 14/04
Reddell, M., “The long-term level “misalignment” of the exchange rate: Some perspectives on causes and consequences,” paper prepared for Reserve Bank/Treasury exchange rate forum, Wellington, March 2013
Prepared by Adil Mohommad.
This is a useful way to organize a discussion on per capita income in New Zealand into factors that have bearing on TFP and those that bear on capital deepening, though these factors are interconnected, as productivity both benefits from, and incentivizes, investment in capital. See “An Empirical Study of Sectoral Level Capital Investments in New Zealand,” Treasury WP 14/04.
The measured sector excludes property and business services, health and community services, cultural and recreational services, and personal and other community services, providing a coverage of about three-quarters of the economy.
This is in line with a recent Treasury estimate; see Treasury Working Paper 14/01.
These results are in line with Treasury estimates of potential growth (see 2012 Half Yearly Economic and Fiscal Update, and steady growth assumptions in Treasury Working Paper 13/18).
The data for cross-country comparison use OECD statistics for the sake of comparability. Statistics New Zealand’s estimates produce a similar long run average TFP growth of 0.7 percent (over 1997-2012), and indicate that the slightly different cycle over 2003-08 produced average TFP growth of 0.6 percent, and 0 percent over 2009-12 (an incomplete cycle).
Federal Reserve of Saint Louis data (sourced from UC Davis and University of Groningen).
This assumption appears plausible when compared to historical annual net migration, except in 2014 when net migration exceeded 51,000. While net migration appears to have peaked since then, this is subject to uncertainty.
In the high migration scenario, population growth in the 15-39 age group is 1.3 percent per year over a 5-year period (2018-2023), compared to 0.4 percent per year in the baseline case, and slightly higher than the baseline in the 40-64 cohort (with no difference in 65+ cohort). Based on the share of these cohorts in the projected WAP size, and assuming a labor coefficient of 0.6, the additional growth amounts to about ¼ percent.
See “New Zealand’s Radical Reforms,” OECD 1997.
See “An International Perspective on New Zealand’s Productivity Paradox,” New Zealand Productivity Commission Working Paper 2014/01.
See “Have developed countries escaped the curse of distance?,” Journal of Economic Geography 2010 (10).
See “Holding on and Letting Go,” Treasury 2014.
Qualitatively similar results are found by Steenkamp (2015); average TFP levels over 2000-10 lag U.S. levels substantially in most sectors, including mining and agriculture, albeit with methodological differences in the measurement of capital stock.
The estimate varies depending on whether the TFP levels in a given sector and country are weighted by its share in value added in that country, or not. Measuring the gap without weighting in the above manner produces a smaller estimated impact on aggregate value added (11 percent).
According to recent estimates, capital intensity in New Zealand is around 60 percent that of Australia (in 2009; see Mason 2013), and 50 percent the levels in the U.S. (in 2005; see “Investment, Productivity and Cost of Capital: Understanding New Zealand’s “Capital Shallowness”,” Treasury Productivity Paper 08/03). A good description of the impact of New Zealand’s savings-investment imbalance on interest rates and investment (and the exchange rate) and can be found in Reddell (2013).
It has been estimated that almost 90 percent of household wealth is held in the form of housing in New Zealand, compared to between half and three-quarters of total household wealth among other OECD countries (2007 figures). See “Savings in New Zealand – Issues and Options” (Treasury September 2010).
See Chapter on “New Zealand: Options for Tax Policy Reform”.