Productivity hub: Sausage roll seminars

Presented by Professor Kevin Fox.

Definitions of output and input are key to studies of productivity analysis, as they are to the national accounts of countries. This presentation systematically reviews alternative definitions at production unit (eg, firm) and aggregate levels, illustrating the different perspectives that they provide on production and income, and making the case for their use in understanding different aspects of firm and country economic performance.

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Kevin Fox is Professor of Economics and Director of the Centre for Applied Economic Research at UNSW Sydney. He works primarily in the field of economic measurement, with a focus on productivity and prices. After studying Japanese in Tokyo for two years, he studied economics at the University of Canterbury and the University of British Columbia. He chaired the 16th Series CPI Review Advisory Group in 2009-2010, he is a member of the Australian Bureau of Statistics Methodology Advisory Committee, and has been a consultant for agencies such as the Australian Treasury, Reserve Bank of New Zealand, the Swiss National Bank, the Australian Bureau of Agricultural and Resource Economics, the Asian Development Bank, and the New Zealand Treasury. He is an Associate Editor of the Journal of Productivity Analysis and immediate past-President of the International Association for Research in Income and Wealth.

Presented by Lynda Sanderson (co-authors: Melanie Morten and David C Maré)

Abstract:

This paper studies the firm-level impacts of a labour supply shock induced by the unanticipated closure of the New Zealand border due to the Covid-19 pandemic.  The border closed in March 2020, in the middle of the autumn arrival season for workers under the Recognised Seasonal Employer (RSE) scheme, preventing seasonal migrants from entering the country as planned. We identify firms that were expecting temporary workers but whose workers did not arrive before the border closure and compare these firms to other firms where the workers arrived just before the border closure. We study the firm-level response to these “missing migrants”, looking at whether firms that missed out on RSE migrants were able to find replacement workers in the domestic labour market, whether they were required to pay more to secure additional workers, and whether they were disadvantaged with respect to worker quality or productivity.

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Lynda Sanderson is a Principal Analyst at the New Zealand Productivity Commission. Lynda’s primary research interest is on the microeconomic analysis of firm performance and behaviour. Her past research has covered areas including trans-Tasman migration, the dynamics of exporting and firm performance, and the impacts of foreign direct investment. Her current interest is in using Stats NZ’s Integrated Data Infrastructure to examine the links between firm and employee characteristics, firm performance, and employee outcomes. Lynda completed her PhD at the University of Waikato in 2011. Prior to joining the Commission, Lynda has worked for the Ministry of Business, Innovation & Employment, the OECD, the Treasury, and the Reserve Bank of New Zealand.

Abstract:

As part of A Fair Chance for All inquiry, the Commission was asked to generate insights about the dynamics and drivers of persistent and intergenerational disadvantage, and the incidence and effect across different population groups. As no suitable longitudinal dataset was available, we constructed our own, drawing on existing datasets. We undertook both descriptive analyses of the incidence, distribution and likelihood of experiencing different types of disadvantage and persistent disadvantage as well as logistic and ordered logit regression analysis to understand the association of different characteristics with disadvantage, life satisfaction, and trust. We also examined characteristics and life events affecting entry to and exit from disadvantage. As we were unable to analyse intergenerational disadvantage we summarise findings of recent New Zealand and international research.

This presentation focuses on the key findings from the descriptive and regression analysis. Participants are invited to read the full quantitative report.

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Carolyn O’Fallon is a Principal Advisor at the Productivity Commission and led work on the recently published A quantitative analysis of disadvantage and how it persists in Aotearoa New Zealand. Following completion of her PhD in public policy, Carolyn led her own consultancy, Pinnacle Research & Policy Limited, for 18 years. Since 2011, she has had a variety of contract and permanent roles in the public sector. Among other things, Carolyn kickstarted the walking school bus movement in NZ, led the cross-agency evaluation of the Prime Minister’s Youth Mental Health Project, wrote "Making Sense of Evidence: A guide to using evidence in policy" (Superu, 2018), and developed a business continuity plan for pandemic influenza which won NZ international recognition.

Presented by Dr Philip Stevens

Abstract:

The long-term prosperity of Aotearoa New Zealand depends in large part on its productivity. Productivity is a measure of how well an organisation, industry or country is using the resources available to it. Productivity is most usefully seen from a longer-term perspective. The investments we make in our people, communities, infrastructure, institutions, and knowledge will determine the lives we are able to lead, and those of our children and future generations. Productivity by the Numbers is designed to inform the public about trends in New Zealand’s productivity, looking at both the latest statistics and longer-run productivity performance measures.  The publication is a key resource aimed to inform and generate discussion about lifting New Zealand’s productivity. It provides an assessment of the performance of the New Zealand economy and a simple framework to help people understand productivity.

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Philip Stevens is the Productivity Commission’s Director, Economics & Research. He was GM of Analysis, Research and Evaluation at the Ministry of Education and at MBIE. Before coming to New Zealand, he was a Research Fellow at the National Institute of Economic and Social Research in London. Philip has published in leading peer-reviewed international journals on subjects such as: productivity analysis; employment; competition; evaluation; the measurement of performance in the public sector; broadband; R&D and human capital. He has a Doctorate in Economics from the University of Oxford.

Presented by Amelia Guha

Abstract:

Economists and policymakers alike have long been concerned about the consequences of interruptions of the initial process of career progression due to graduating during recessions. Increasing evidence in the literature suggests that graduating from university in a poor economy can have substantial long-term effects on the earnings of college graduates. In this paper, we provide novel evidence, supporting the role of family characteristics on children's labour market outcomes. We study the short-term and long-term effects of graduating during adverse labour market conditions on income. In line with the literature, we see negative effects on earnings during the initial year of labour market entry. The effect becomes insignificant after the first year. However, when we change our identification approach where we run our analysis using sibling fixed effects regression, we find that unemployment rates do not matter. Once we control for family background heterogeneity, labour market conditions do not matter for earnings. These results suggest that for a small country like New Zealand, networking and family connections can act as insurance during economic shocks.

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Amelia Guha is a researcher for the Productivity Commission. Amelia is working on her PhD in Economics at the University of Otago, which included an analysis of the impact of graduating during a recession. Her research interests include public policy, labour and gender economics and finance.

Presented by Corey Allan

Abstract:

Abstract: We seek to understand the extent of employer monopsony power in New Zealand’s private sector labour market. New Zealand is an interesting setting in which to study monopsony power. It has a small, geographically dispersed population, meaning that outside employment options for workers may be limited. On the other hand, New Zealand is generally considered to have a flexible labour market with large gross labour market flows and settings that are conducive to economic growth. Using firm and individual-level microdata from StatsNZ’s Longitudinal Business Database (LBD) and Integrated Data Infrastructure (IDI), we compare and contrast several different measures of monopsony power using a consistent sample of firms. We provide estimates of monopsony power based on separation elasticities, estimates of the wedge between the marginal product of labour and the wage, and by direct estimation of firm-level labour supply elasticities. Estimates based on separation elasticities and the marginal product-wage wedge are reasonably consistent, with an implied wage markdown of at most 25%, on average. Direct estimates of labour supply elasticities are sensitive to small changes in specification, highlighting the identification difficulties. Our estimates based on separation elasticities and marginal product-wage wedges are broadly consistent with recent international evidence. These results suggest the presence of employer monopsony power in New Zealand’s private sector, although the extent of that power may be limited. This does not preclude pockets of greater monopsony power in segments of the labour market, which future research will explore.

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Corey Allan is a Principal Analyst in MBIE’s Chief Economist Unit, where his research focuses on the role of firms in worker outcomes. His research interests are broadly in the area of labour economics and firm performance. He has held previous positions at Motu Economic and Public Policy Research and he holds a Masters degree in economics from the University of Otago.

Presented by Lynn Riggs, Quy Ta.

Abstract:

Given the issues surrounding poverty measurement using income, the international literature has moved beyond measuring income poverty alone to including deprivation and exclusion when examining disadvantage. This more wholistic approach allows for a better understanding of disadvantage, persistent disadvantage and their effects. Following the international literature, we examine the links between income poverty, deprivation, and social exclusion using data from the Household Economic Survey (HES), the 2013 and 2018 Censuses, and the General Social Survey (GSS) to better understand disadvantage in Aotearoa New Zealand from these different perspectives. As part of this examination, we analyse the factors which are associated with the likelihood of having any one aspect of disadvantage, the likelihood of having multiple aspects, and the likelihood of entering/exiting disadvantage over time. In addition to examining disadvantage, we conduct similar analyses for persistent disadvantage.

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Lynn Riggs is Principal Advisor in the Economics & Research Team of the New Zealand Productivity Commission. Prior to joining the Productivity Commission, Lynn worked for Motu and for the US Government (Commodity Futures Trading Commission, Census Bureau, Centers for Disease Control). Her research interests are in labour, health, education, and financial economics primarily using large, confidential data sets like Statistics New Zealand’s Integrated Data Infrastructure and Longitudinal Business Database.

Quy Ta is an Advisor in the Economics & Research Team of the New Zealand Productivity Commission, focussing on income inequality and persistent disadvantage. Prior to joining the Productivity Commission, he worked on his PhD in Economics at Victoria University of Wellington.

Presented by Hien Nguyen and Tod Wright

Fiscal incidence studies augment analyses of the redistributive effects of personal income tax and cash benefits on household incomes — such as those produced by Treasury’s TAWA model — with the contributions of indirection taxation and in-kind social services. We review previous studies of fiscal incidence undertaken at Treasury and report on our work to extend these studies with data for the 2018/19 tax year.

Tod Wright is a Senior Modelling Analyst in the Analytics & Insights Team at the New Zealand Treasury. His work uses microsimulation methods and administrative microdata to model and characterise aspects of the New Zealand tax and transfer system. Tod is a computational physicist by training and holds a PhD from the University of Otago. Prior to joining the Treasury he worked as a research fellow at the University of Queensland.

Presented by Lynn Riggs

Being able to affordably heat the home and access other essential energy services is a challenge faced by many New Zealand households, and a wide range of factors contribute to a household’s energy expenditures. We examine household-level energy expenditure data as collected in the expenditure component of the Household Economic Survey to determine which factors, statistically and economically, affect these expenditures. By examining differences between actual expenditures in colder months relative to other months, we also aim to have a better understanding of the factors that drive heating behaviours in New Zealand.

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presented by Richard Fabling

Abstract:

In New Zealand, migrants constitute a substantial, and increasing, proportion of the workforce. We document the relative wages of migrants over time, drawing empirical links between migrant-native wage gaps (both negative and positive) and the sorting of migrants into firms and industries with systematically different productivity levels from the average firm employing New Zealand-born worker. Initially we summarise these facts according to migrant visa category, before focussing on migrants who live in New Zealand for at least five years – a group capturing the majority of migrant workers. For this group, we then trace the evolution of wage gaps and job sorting over the initial ten years since arrival into New Zealand to live, drawing conclusions about the rate of labour market assimilation of immigrants and the sorting mechanisms contributing to wage convergence for long-term immigrants.

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Richard is an empirical microeconomist specialising in business and labour economics, with a particular interest in understanding New Zealand workers, firms and jobs. Prior to this he was an independent researcher, and has held senior research positions at Motu, the Reserve Bank and the Ministry of Economic Development.

Richard was instrumental in the development of the Business Operations Survey, the Longitudinal Business Database (LBD), and the labour and productivity datasets within the LBD, and has co-authored over forty papers using these data. Richard has a PhD in Applied Mathematics (Magnetohydrodynamics) from the University of Waikato, where his thesis entailed modelling solar flares.

Authors: Peter Nunns, Hannah Ouellet

Abstract:

A productive and financially sustainable construction sector is essential for addressing our infrastructure challenges. To better understand the sector, we review the evidence on the economic performance of New Zealand’s construction sector, with a particular focus on the heavy and civil construction sector due to the important role it plays in delivering and maintaining infrastructure. First, we examine how different parts of New Zealand’s construction sector have performed over the last two business cycles (2000-2008 and 2008-2020). We assess the links between productivity growth, price growth, output growth, and labour requirements through the framework of Baumol’s unbalanced growth model. Second, we benchmark the long-run productivity growth performance of New Zealand’s construction sector against other OECD countries. Given the large variation in productivity growth performance between countries, we assess whether factors like market characteristics, market dynamics, and statistical methodologies can explain observed differences.

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Peter Nunns is Director of Economics at the New Zealand Infrastructure Commission, Te Waihanga. His objective in this role is to provide evidence on how we can increase the efficiency of the New Zealand infrastructure sector. He has previously worked in central government, local government and consultancy, often with a focus on housing, transport economics, and urban development.