PRODUCTIVITY IN THE NEW ZEALAND PRIMARY AND DOWNSTREAM SECTORS

Transcription

1 5 s Ausralian Agriculural and Resource Economics Sociey Annual Conference 4-6 February 2007 Queensown New Zealand PRODUCTIVITY IN THE NEW ZEALAND PRIMARY AND DOWNSTREAM SECTORS Kay Cao Rod Forbes and Peer Gardiner Monioring and Evaluaion MAF Policy PO Box 2526 Wellingon New Zealand Conac kay.cao@maf.gov.nz We would like o hank Brendan Mai and Paul Clark for commens on an earlier draf and oher Saisics New Zealand saff for heir assisance wih daa.

2 Absrac In New Zealand here has been increasing ineres in produciviy growh boh a economywide and secor levels. The Minisry of Agriculure and Foresry mainains a oal facor produciviy series for he primary secors. As par of he minisry s flagship projec on growh and produciviy we are reviewing he mehodology and exending produciviy derivaion o downsream indusries. This paper presens our research resuls o dae. Key words: oal facor produciviy New Zealand agriculure foresry downsream secors Background Growh and Produciviy flagship projec a he Minisry of Agriculure and Foresry Undersanding he drivers of economic growh produciviy and resource allocaion in he secors is one among hree flagship projecs ha are currenly underaken a he Minisry of Agriculure and Foresry (MAF). The projec aims a monioring he performance of he secor and developing a beer undersanding of he sources of secor s growh in order o enhance policy undersanding and oucomes. MAF Policy is uniquely posiioned conribue o his policy debae and is beer placed han mos governmen organisaions o provide pracical and grounded advice o he secors ha are cenral o New Zealand s economic environmenal and social oucomes. The agriculural horiculural and foresry secors are a he hear of he New Zealand economy. Including associaed processing service and ranspor indusries he secors represen over 7% of he oal economy gross domesic produc. In addiion around wo hirds of New Zealand s merchandise expors come from he land base secors. Idenifying he linkages beween economic growh produciviy and echnological change are challenging. The reason for his in par is due o differing opinions on he relaionships linking he drivers of produciviy and echnological change o growh. I also reflecs he differen mehodologies and ools available o diagnose produciviy growh. Measuring secor produciviy growh forms a core par of he projec (ohers include resource use and indusry srucure innovaion and echnology ransfer and rade and growh). This paper repors iniial produciviy measuremen research resuls. These resuls are he saring poin o furher produciviy measuremen work ha MAF Policy will coninue o develop in he fuure. 2

3 Hisory of produciviy measuremen a MAF The firs research underaken on produciviy in MAF followed an OECD reques in early and culminaed in a echnical paper by Johnson (). From a saisical poin of view agriculure secor daa in New Zealand is unique compared o oher secors of he economy in ha a comprehensive disaggregaion of boh gross oupu and inermediae consumpion is available over a reasonably long ime period. A Törnqvis approach o oal facor produciviy (TFP) derivaion was used - based on a Unied Saes Deparmen of Agriculure publicaion (USDA 980). In subsequen years work on produciviy measuremen coninued inermienly hrough updaing o (Forbes and Johnson 200) exending he coverage o he Foresry and Logging Secor (Johnson and Forbes ) and updaing o (SONZAF ). The curren work exends he analysis by updaing o changing consan price series o 995/96 redefining capial sock series and exending he coverage o downsream manufacuring secors he Food Beverage and Tobacco Manufacuring Secor and he Wood and Paper Produc Manufacuring Secor. Lieraure review of TFP work in New Zealand Measuring TFP 2 growh has received grea ineres in New Zealand in he las decade. There are several reasons for his. Firsly TFP growh conribues significanly o growh in gross domesic produc (GDP) and underpins fuure growh in GDP per capia. Secondly a lo of aenion has been given o New Zealand TFP performance since he 984 deregulaion. MAF was he firs o evaluae he impacs of he reform on he primary land based secor. Thirdly here was a concern ha New Zealand TFP growh has been low compared o oher OECD counries (McLellan ). The mehods used for measuring TFP growh have been well esablished (see for example OECD 200; Mawson e al ). The four common mehods used in measuring TFP are: index number growh accouning disance funcion and economeric mehods. The index number mehod however is he one ha ofen used by saisical agencies in deriving he economy-wide and indusry level TFP. In New Zealand here have been several major sudies using he index number mehod o measure aggregae TFP growh. Diewer and Lawrence (999) was he firs comprehensive sudy ha measured produciviy for he economy and he major secors. This sudy covered period from 978 o and provided a comprehensive daabase on oupus labour and capial uses. Subsequen sudies have exended he sudy period and examined alernaive daa sources (Black e al ; SNZ ). Mos sudies also provided a measure of produciviy for he primary secors (eg Diewer and Lawrence 999; Black e al Hall and Scobie ; Laimore ). Diewer and Laurence (999) repored an annual TFP growh rae of 3.9% for he agriculure secor for he period This is hree imes higher han he economy-wide TFP growh rae which was esimaed a.3%. Foresry TFP growh rae was measured a 6.3% for he same period. TFP of he downsream secors which include food and beverage wood 2 The erms oal facor produciviy (TFP) and mulifacor produciviy (MFP) are used inerchangeably in he New Zealand produciviy lieraure. 3

4 producs and paper producs manufacuring grew a a lower rae during he same ime period being 0.7% 0.3% and.3% respecively. Black e al () repored an MFP growh rae of % for he agriculure fisheries and foresry aggregae secor over he period -. The secor however had a higher TFP growh rae during 993- (2.5%). Boh Hall and Scobie () and Laimore () uilised a similar daa se in which he agriculure secor was more narrowly defined compared wih oher sudies. These wo sudies excluded agriculure services from he oupu caegories in order for he oupu series o be consisen over a long period of ime (929-). Laimore () repored a TFP growh rae of.5% per year for he period before984 and 2.5% per year afer 984. The firs official produciviy measures for he New Zealand economy were released by Saisics New Zealand in March. These were annual labour capial and MFP indexes from o covering a subsanial subse of he economy 3. The aggregae MFP growh rae of he measured secor was esimaed a.8% for he period -. The fuure inenion of Saisic New Zealand is o provide an annual updae of he indexes and evenually exend o lower secoral levels. Descripion of mehodology Since mid s MAF has mainained a series of TFP for he primary secors. Before he Growh and Produciviy (GAP) projec was iniiaed on-farm TFP growh esimaes were available for he period This projec coninues he curren TFP work a MAF. In paricular he sudy period is exended o. Furher mehodology experimening is underaken. There has also been collaboraion wih Saisics New Zealand in updaing daa series and measuremen mehodology. Furhermore for he firs ime TFP growh is measured for he downsream manufacuring secors. Index number mehod TFP is measured as a raio of an oupu index o a composie inpu index. O TFP = I where O is oupu index I is inpu index represens ime period. () 3 The measured secor comprised he Ausralia and New Zealand Sandard Indusrial Classificaion divisions A o K plus P. 4

5 5 The Törnqvis index mehod is used o derive he (aggregae) oupu index (in he case of muliple oupus) and he aggregae inpu index. In general he Törnqvis quaniy index beween period and - (or chained index) is wrien as: + = 2 i w i w i q i q T n i (2) where q is he quaniy of oupu (or inpu) w is he share of he oupu (or inpu) in oal value of oupus (or inpus) n is he number of oupus (or inpus) and i represens oupu (or inpu) i. For example a composie inpu index of capial (K) and labour (L) is calculaed as: + + =. 2 2 l w l w L L k w k w K K I (3) where w k and w l are he shares of capial income and labour income respecively in oal facor income (GDP) ha is: k l l k k k w w Y Y Y w and = + = (4) where Y k and Y l represen capial and labour incomes respecively. The firs componen on he righ hand side of equaion (3) represens he conribuion of capial o oupu growh and he second componen represens labour conribuion. TFP represens he growh in oupu ha can no be explained by inpu growh. I is herefore derived using a composie inpu index. When only one inpu is used he oupu-inpu raio is called parial produciviy (eg capial or labour produciviy). Parial produciviy reflecs he combined effecs of changes in oher inpus as well as echnical and efficiency change. For example labour produciviy reflecs he join influence of changes in capial and TFP growh. Therefore i can be expressed as: + = 2 w k w k L K L K TFP TFP LP where (K/L) represens he capial o labour raio. The increase (decrease) of his raio over ime indicaes capial deepening (shallowing).

6 Daa Oupu For all secors GDP in consan prices is used as oupu volume. Saisics New Zealand daa on consan 995/96 price GDP for o are available for all secors. These are used o derive oupu indexes. For he primary secors GDP series backdaed o 972 were consruced using consan price 99/92 daa 4. Capial inpu Saisics New Zealand daa on indusry producive capial sock (PKS) in consan prices is used as capial inpu volume. To derive capial cos (or income) PKS in curren prices is used. This approach is called user cos of capial (UCC) approach. Indusry capial cos is specified as: UCC = PKScurrenprices * (d + r) Where d is capial depreciaion rae r is rae of reurn on capial. (5) Following Saisics New Zealand approach (SNZ ) depreciaion rae is calculaed as a raio beween consumpion of fixed capial and curren price PKS. For he agriculure secor capial rae of reurn obained from Mea and Wool New Zealand is used. For oher indusries en year governmen bond yield is used. Recen produciviy lieraure (eg OECD 200; Coelli e al ) suggesed he use of capial gain and producion ax on capial in deriving capial cos. MAF is currenly considering hese issues. However due o curren daa unavailabiliy his paper only repors TFP esimaes using he approach as specified in equaion (5) above. Labour inpu Saisics New Zealand fullime equivalen employmen (FTE) daa is used for labour volume. Labour income (cos) is simply one minus capial cos share. MAF is considering alernaive daa for labour volume (eg hour paid). However his remains a fuure research issue. Saisics New Zealand employmen daa for he primary secor comes from a combinaion of he Census of Populaion and Dwellings and he Household Labour Force Survey (HLFS). This provides full and par ime employmen deails. The laer are convered o full ime equivalens by assuming ha on average par imers are 50% employed on an annual basis. For he manufacuring secors employmen daa comes from a combinaion of he Quarerly Employmen Survey and he HLFS. In his case employmen is expressed as he average weekly employmen numbers and he average weekly hours paid. 4 For he primary secors GDP daa in curren prices and in 99/92 consan prices are available back o 972. The 99/92 consan price series is used o esimae a longer run 995/96 consan prices series as boh series overlap for he year 995/96. This is a emporary soluion unil Saisics New Zealand publishes a 995/96 consan price GDP series backdaed o 978 for all secors of he economy a he end of

7 TFP resuls and analysis Resuls overview and comparaive analysis For boh primary secors TFP growh has doubled from 972 o wih an average growh rae of more han 2% per year (Table ). Resuls also show ha almos all TFP growh come from TFP growh of he period afer he 984 deregulaion. This was he sar of he era of farming wihou subsidies and comprehensive financial deregulaion. I reflecs ha farming has become more efficien and uilised beer echnology 5. The flucuaions in TFP growh reflec also exernal shocks. For example he 993 dip was he resul of an El Nino drough in /93. The dip reflecs he flow-on impacs from he Asian crisis and also El Nino and La Nina droughs which happened around his ime. The major flucuaions beween and 984 in he foresry and logging secor reflec changes in ownership wih he sale of governmen owned foresry esaes o he privae secor. The downsream manufacuring secors experienced modes growh during and averaging around % for food beverage and obacco manufacuring and % for wood and paper produc manufacuring. This is lower compared o average TFP growh of Saisics New Zealand s measured secor. The food beverage and obacco manufacuring secor experienced a higher TFP growh rae for he period from o 993 compared o he subsequen period averaging.8% per year. This is higher han average TFP growh of Saisics New Zealand s measured secor for he same period. TFP growh of he wood and paper produc manufacuring secor however declined during and 993. In he subsequen period o he secor had an average TFP growh rae of % similar o ha of food beverage and obacco manufacuring bu lower han Saisics New Zealand measured secor s average. 5 Index number mehod assumes efficien producion. However in general TFP growh reflecs efficiency gain echnical change and oher facors such as economies of scale variaions in capaciy uilizaion and measuremen errors. 7

8 Figure. TFP of agriculure foresry and dowsream secors.5.3 Indexes (=) Agriculure Foresry FB&T W&P SNZ measured secor Table : Agriculure foresry and downsream secors TFP growh (annual average growh rae % 972-) Time Period Agriculure Food Beverage & Tobacco Manufacuring Foresry & Logging % 2.7% % % % 3.6% Wood & Papers Manufacuring SNZ Measured Secor - 2.5%.%.9% %.8% %.8% 5.0% -0.5% % % % % % 2.0% Agriculure Agriculure TFP growh during 972 and can be broken ino five differen phases: () a no-growh period ; (2) a modes growh period (3.2% per year); (3) a srong growh period (9.6% per year); (4) a TFP declining period - (-.% per year); and (5) a recen growh period -06 (.9% per year). Agriculure labour produciviy and capial produciviy mimic hese rends alhough in recen years he former grew a a higher rae (2.6% per year) while he laer declined a % per year (Figure 2). The flucuaion in TFP growh could be furher explained by he movemens of oupu and inpu growh. As shown in Figure 3 beween 972 and 984 inpu was almos fla wih no 8

9 growh in oupu which made his he no-growh period. From 984 o 993 oupu grew.7% per year while inpu decreased % per year which led o a modes TFP growh period. The srong growh period 993- was he resul of an oupu growh a 7.8% per year and inpu decrease a.7% per year. From o inpu increased slighly a % bu oupu was fla which explains he decline in TFP growh. In he las hree years inpu showed a decline of 0.5% per year while oupu grew % per year which led o an increase in TFP growh. The decrease of inpu beween 984 and reflecs a reducion in capial inpu of.5% per year beween 984 and 993 and % beween 993 and and a reducion in labour inpu of % and 2% for he corresponding periods (Figures 3-4). Boh capial and labour increased during - around % per year on average. In he las hree years capial coninued o increase a 2.4% per year while labour decreased a % per year. This led o a significan higher capial o labour raio compared wih he res of he period. Over he 972- period oupu grew by.6% per year here was no conribuion from capial and labour conribuion declined a % per year (Figure 6). TFP grew a 2% per year which offse he negaive conribuion from labour. However from onwards capial conribuion slighly increased a % per year while labour conribuion declined furher a % per year. An improved capial conribuion was also refleced in slighly higher conribuion from capial deepening o labour produciviy growh (Figure 8). From onwards capial deepening conribuion o labour produciviy has growh a an averaged rae of 0.7% per year much higher han he 972- average of 0.%. Needless o say TFP growh is also a significan conribuion o secor labour produciviy growh. Resuls showed ha during he sudy period labour produciviy grew a 2.% per year which was made up of 2% TFP growh and 0.% capial deepening growh. 9

10 Figure 2. Agriculure secor produciviy indexes Figure 3. Agriculure: inpu oupu & TFP indexes Indexes ( = ) Indexes (=) Indexes (=) Figure 4. Agriculure: capial and oupu indexes capial produciviy oupu capial inpu Figure 6. Agriculure: conribuion o secor GDP growh Labour produciviy TFP Capial produciviy TFP oupu capial conribuion labour conribuion Figure 8. Agriculure: conribuion o secor labour produciviy growh Indexes (=) Indexes (=) Indexes (=) Figure 5. Agriculure: labour and oupu indexes labour produciviy oupu labour inpu Figure 7. Agriculure: capial o labour raio indexes capial inpu labour inpu capial o labour raio TFP inpu oupu Indexes (=) labour produciviy capial deepening conribuion TFP 0

11 Foresry and Logging Foresry and logging TFP growh also experienced differen phases over he period from 972 o. There was modes growh beween 972 and 984 (averaging % per year). Then here were wo growh peaks in 99 and. This led o srong growh of 2% per year beween 984 and 99. Since here was a period of declining growh unil (averaging -6.5% per year) before TFP growh rising up again a 8% per year in he las wo years. Labour produciviy growh closely followed TFP growh alhough having a slighly higher growh rae a 3.2% per year beween 972 and. Capial produciviy however grew a a lower rae over he period averaging % per year (Figure 9). Figure 0 shows he movemens in foresry and logging oupu and inpu ha helps o explain he flucuaion of TFP growh during he sudied period. Beween 972 and 984 boh oupu and inpu increased however oupu increased a a slighly higher rae (4.4% per year) compared wih 3.2% per year of inpu growh. This led o modes TFP growh of % per year. From 984 o 99 oupu coninued o grow a 5% per year while inpu decreased a 6.3% per year leading o TFP growh of 2% per year. The nex period from 99 o 995 experienced a decline in TFP growh as inpu grew a a much faser rae han oupu (3.6% vs 3.3% per year). In he following period unil oupu coninued o grow modesly a 2.2% while inpu decreased a 7% per year his improved TFP growh a 0% per year. From o inpu grew much faser han oupu (0.3% vs 3.% per year) his decreased TFP growh a 6.5% per year. In he las wo years boh oupu and inpu have declined alhough oupu declined a a slower rae han inpu (-3.4% vs -% per year) his lead o a TFP growh rae of 8% per year. The flucuaion in foresry and logging inpu refleced he volaile movemen in labour inpu (Figure ). Capial inpu growh has been quie fla during he firs half of he sudied period alhough slighly increased in he second half. Inpu growh beween 972 and 984 was made up of boh capial and labour growh. Similarly inpu decline beween 984 and 99 was made up of boh capial and labour inpu decline alhough labour volume declined a a much higher rae (-9.4% vs -% per year). Capial inpu kep increasing beween 99 and however labour inpu increased beween 99 and 995 bu declined beween 995 and. In recen years capial inpu increased modesly a 2.2% per year while labour inpu decreased significanly a 3% per year. This is refleced in a higher capial o labour raio growh (7.4%) as compared wih an average rae of 4.3% for he whole period. The conribuion of capial growh o he secor GDP growh has been quie fla during he sudied period (Figure 4). In conras labour conribuion has been quie volaile due o he flucuaion in is volume. TFP growh conribued significanly o secor GDP growh. For he 972- period GDP growh averaged 3.4% per year TFP growh conribued 2.7% while capial and labour conribued 0.3% and % respecively (Table 2). Beween 972 and 984 labour conribuion ouweighed TFP conribuion (2.7% vs %). However for he second par of he sudied period labour conribuion declined a an average rae of 0.9% per year.

12 Figure 9. Foresry and Logging Secor Produciviy Indexes Indexes (=).6 L produciviy TFP K produciviy Figure 0. Foresry and Logging: inpu oupu & TFP indexes Figure. Foresry and Logging: capial labour and capial deepening Indexes (=).6 TFP oupu inpu Indexes (=).6 capial labour capial o labour raio Indexes (=).6 Figure 2. Foresry and Logging: labour produciviy index labour produciviy oupu labour inpu Indexes (=) Figure 3. Foresry and Logging: capial produciviy capial produciviy oupu capial inpu Figure 4. Foresry and Logging: Conribuion o secor GDP growh Figure 5. Foresry and Logging: conribuion o secor labour produciviy growh Indexes (=).6 TFP K conribuion L conribuion oupu Indexes (=).6 TFP capial deepening labour produciviy

13 Food Beverage and Tobacco manufacuring The food beverage and obacco manufacuring (FB&T) secor experienced a modes TFP growh period from 987 unil. However TFP growh slowed down from o and declined furher hereafer. The period wih he highes growh rae was beween 987 and 993 (2.3% per year) hen growh slowed down o.7% per year during 993 and. In he las hree years TFP growh declined by 2.8% per year. These flucuaions led o an annual average growh rae of % for he whole 987- period while capial produciviy declined by % and labour produciviy increased by 2.6% (Figure 7). Beween 987 and oupu (GDP) grew a 2.% per year. The period beween 993 and experienced he highes oupu growh rae of 3.8% per year. There was no growh in oupu in he las hree years (Figure 6). Inpu declined beween 987 and 993 (-2% per year) and increased by 2.2% per year for he res of he period. This explains why TFP growh has been slow in he second par of he sudy period. Capial inpu has been on he rise since he beginning of he sudied period averaging 3.5% per year. However labour inpu declined from 987 o 993 (-4.8% per year) hen slowly increased a an average of.7% per year for he res of he sudied period. Since capial inpu has increased rapidly averaging 4.5% per year while labour inpu grew a a slower rae of 2% per year. This has led o a higher capial o labour raio growh a 2.5% per year compared wih only 0.5% per year in he previous period (Figure 20). In conras o he primary secor resuls showed a significan conribuion from capial o oupu growh (Figure 2 and Table 2). From 987 o oupu grew a 2.% per year his was made up of % conribuion from capial growh % from TFP growh and -0.% from labour growh. In recen years boh capial and labour conribued significanly o oupu growh averaging % for capial and.6% for labour which helped o offse declining TFP growh (-2.8% per year). Similarly capial deepening conribued significanly o labour produciviy growh averaging % per year for he period

14 Figure 6. Food Beverage & Tobacco Manufacuring: inpu oupu & TFP indexes Figure 7. Food Beverage and Tobacco Manufacuring Secor Produciviy Indexes Indexes (=) TFP inpu oupu Indexes ( = ) Labour produciviy Toal facor produciviy Capial produciviy Figure 8. FB&T: labour and oupu indexes Figure 9. FB&T: capial and oupu indexes Indexes (=) labour produciviy oupu labour inpu Indexes (=) capial produciviy oupu capial inpu Figure 20. FB&T: capial o labour raio indexes Figure 2. FB&T: TFP capial and labour conribuion o secor GDP growh Indexes (=) capial inpu labour inpu capial o labour raio Indexes (=) TFP oupu capial conribuion labour conribuion Figure 22. FB&T: conribuion o labour produciviy Indexes (=) labour produciviy capial deepening conribuion TFP

15 Wood and Paper produc manufacuring The wood and paper produc manufacuring (W&P) secor TFP grew % per year from 987 o993 followed by a no growh period unil 999. The nex period unil experienced he sronges growh averaging 3% per year. However in he las hree years TFP has declined a 4.7% per year. All hese flucuaions led o an average growh rae of % for he period 987 o while capial produciviy declined by.7% per year and labour produciviy grew by 2.% (Figure 23). However all produciviy indexes decreased sharply from. Beween 987 and 993 oupu grew 2.% per year while inpu grew 0.7% per year leading o modes TFP growh of % per year. In he nex six years o 999 inpu grew slighly higher han oupu (.8% vs % per year) leading o TFP declining a % per year. From 999 o oupu increase sharply a 4.8% per year while inpu coninued o grow a.8% per year leading o an average TFP growh rae of 3%. From onwards oupu growh declined by 0.7% per year while inpu expanded a 4.2% per year leading o TFP declining a 4.7% per year. Inpu s slow growh beween 987 and 993 was due o a decrease in labour inpu (-2.6% per year) however his was offse by capial growing a a higher rae (4.8% per year). Capial inpu kep growing a a similar rae unil and only slowed down in he las hree years o 2.6%. Labour inpu growh was almos fla unil and hen increased by 5.2% per year. Subsequenly his led o an increased capial o labour raio from 987 o (4.7% per year) bu declined in recen years (-2.4% per year). Capial growh conribued significanly o oupu growh during he sudied period. From 987 o oupu grew a 2.3% per year which was made up of.6% conribuion from capial % conribuion from TFP growh and only 0.% from labour growh. Only in recen years did conribuion from labour increase by 3.% while capial coninue o conribue abou %. 5

16 Figure 23. Wood and Paper Producs Manufacuring Secor Produciviy Indexes Indexes (=) Labour produciviy Toal facor produciviy Capial produciviy Indexes (=) 987 Figure 24. Wood and Paper Producs manufacuring: inpu oupu and TFP indexes TFP oupu inpu Indexes (=) Figure 25. W&P Manufacuring: capial o labour raio.6 capial labour capial o labour raio Figure 26. W&P Manufacuring: labour produciviy Figure 27. W&P Manufacuring: capial produciviy Indexes (=) labour produciviy oupu labour Indexes (=) capial produciviy oupu capial Figure 28. W&P Manufacuring: conribuion o secor GDP growh Figure 29. W&P Manufacuring: conribuion o secor labour produciviy growh Indexes (=) TFP capial conribuion labour conribuion oupu Indexes (=) TFP capial deepening labour produciviy

17 Table 2. Conribuion of TFP capial and labour o secor GDP growh (annual average growh rae % 972-) Time Period Agriculure Food Beverage &Tobacco Manuf. Foresry & Logging 972- Oupu growh.6% 3.4% K conribuion % 0.3% L conribuion -% % TFP conribuion 2.0% 2.7% Oupu growh -0.% 4.4% K conribuion 0.3% 0.5% L conribuion 0.% 2.7% TFP conribuion -0.5% % 984- Oupu growh 2.6% 2.9% K conribuion -% % L conribuion -% -0.9% TFP conribuion 3.4% 3.6% Wood & Papers Manuf. SNZ Measured Secors - Oupu growh.5% 2.0% 4.3% 2.% 2.8% K conribuion -0.% 0.9% %.6% % L conribuion -0.9% % 2.0% 0.% % TFP conribuion 2.5%.%.9% %.8% Sensiiviy analysis Chained vs unchained TFP In MAF s previous works only unchained TFP indexes were repored. In his sudy we oped o presen chained TFP indexes which were ofen suggesed by he lieraure (see for example OECD 200). Chained TFP is derived by changing he fixed base year comparison o a year-o-year comparison. For example all indexes are expressed as a raio beween a quaniy of he curren year () and a quaniy of he previous year (-) and average weigh (value share) is calculaed for weighs of period and (-). The formulae in he mehodology secion described his mehod. Resuls show ha here is rivial difference beween a chained and an unchained TFP index. As Table 5 shows here is no difference beween he wo indexes for all secors excep 7

18 foresry and logging. The differences ha happened wih his secor perhaps due o more flucuaions in TFP growh rae during he sudy periods. Table 5. Experimen resuls for chained and unchained TFP indexes Period Agriculure Foresry FB&T W&P Unchained Chained Unchained Chained Unchained Chained Unchained Chained % 2.0% 2.9% 2.7% % -0.5% % % % 3.4% 3.9% 3.6% % % % % Capial rae of reurn For all secors excep agriculure governmen 0 year bond yield is used as ineres rae for capial cos derivaion. An alernaive for he agriculure secor is a reurn on capial from indusry daa source. Mea and Wool New Zealand Economic Services has a long ime series from heir sheep and beef farm survey and his daa is used here. Resuls showed ha TFP growh esimaes using 0 year bond yield are very close o hose using he sheep and beef rae of reurn. Average TFP growh for he 972- period using 0 year bond yield was.9% per year while TFP growh using sheep and beef daa was jus slighly higher a 2% per year. Conclusion Concluding remarks This paper repors MAF recen and ongoing research in measuring TFP growh in he primary and downsream manufacuring secors. Over he sudy period 972- primary secor TFP has increased averaging 2% for agriculure and 2.7% for foresry and logging. Following financial deregulaion and removal of governmen subsidies afer 984 TFP growh was significanly higher averaging 3.4% for agriculure and 3.6% for foresry and logging. TFP growh conribued significanly o secor GDP growh. Conribuions from capial and labour inpu growh have been negligible. TFP growh of he downsream manufacuring secors have been lower han hose of he primary secors. Beween and TFP growh of food beverage and obacco manufacuring averaged.% per year and wood and paper produc manufacuring s averaged % per year. These are lower han TFP growh of Saisics New Zealand s measured secor over he same period. Capial conribuion o secor GDP growh was quie significan in boh secors. However labour conribuion was negligible. 8

19 Fuure research Wha remained o be done is furher experimens wih mehodology and daa sources. For example he use of capial gain and axes need o be considered in deriving he user cos of capial. Subjec o daa availabiliy his would bring MAF s mehod closer o ha of Saisics New Zealand. In erm of daa sources work can be done for example in using alernaive measures for labour volume such as hours paid. Adjusing for labour qualiy could be anoher ineresing area o look a. MAF s furher work will explore sub-secor level of he primary and manufacuring secors. This will be imporan o beer undersand he various sources of produciviy growh in he agriculural and foresry secors. In conjuncion o undersanding he sub-indusry sources of produciviy growh furher diagnosis of he elemens of growh will provide furher evidence from which beer growh policies can be developed. Wih an esablished mehod i only requires he availabiliy of daa a a disaggregae level. Fuure challenge will also include examining he facors ha influence secor TFP growh. References Black M. Melody G. and McLellan N. () Produciviy in New Zealand o Treasury working paper 03/6. Coelli T.J. Rao D.S.P. O Donnell C.J. and Baese G.E. () An Inroducion o Efficiency and Produciviy Analysis 2nd Ediion. Springer New York. Diewer and Lawrence (999) Diewer E. and Lawrence D. (999) Measuring New Zealand's produciviy Treasury working paper hp:// Forbes R.and Johnson R. (200) Recen Trends in Agriculural Produciviy Agribusiness Review Vol hp:// Hall J. and Scobie G. () The role of R&D in produciviy growh: he case of agriculure in New Zealand: o -0 Treasury working paper 06/0. Johnson R. () Agriculural Produciviy rends for New Zealand 972- MAF Policy Technical Paper 96/2 Wellingon New Zealand Johnson R. and Forbes R. () Recen Produciviy Trends in New Zealand Primary Secors MAF Technical Paper no. /20. Laimore R. () Farm subsidy reform dividends Paper presened a he Norh American Agrifood Marke Inegraion Consorium Meeing Calgary Albera -2 June. Mawson P. Carlaw K. I. and MacLellan N. () Produciviy measuremen: Alernaive approaches and esimaes Treasury working paper 03/2. McLellan N. () New Zealand's Performance: Conex and Challenges Treasury workshop on Produciviy: Performance Prospecs and Policies. 9

20 OECD (200) OECD produciviy manual: a guide o measuremen of indusry-level and aggregae produciviy growh Paris. SONZAF () Siuaion and Oulook for New Zealand Agriculure and Foresry Annex ables 4 and 5 MAF Wellingon New Zealand. Saisics New Zealand () Produciviy Saisics - Ho Off he Press hp:// USDA (980) Measuremen of US Agriculural Produciviy Technical Bullein no. 64 Washingon USA 20

21 Appendix Agriculure secor Year Labour PKS GDP GDP K&L TFP kfte's consan consan index index chained ($millions) ($millions)

22 Foresry and Logging Year Labour PKS GDP GDP K&L TFP kfte consan consan index index index ($millions)

23 Food beverage and obacco manufacuring Year Labour PKS GDP GDP K&L TFP k's consan consan index index chained ($millions) ($millions) Wood and paper produc manufacuring Year Labour PKS GDP GDP K&L TFP k's consan consan index index index ($millions) ($millions)