Firm Productivity Growth and Skill

David Maré, Dean Hyslop and Richard Fabling

No 9510, IZA Discussion Papers from Institute of Labor Economics (IZA)

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.

Keywords: linked employer-employee data; decomposition; reallocation; productivity; LBD; firm turnover (search for similar items in EconPapers)
JEL-codes: D24 J24 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2015-11
New Economics Papers: this item is included in nep-eff
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Published - published in: New Zealand Economic Papers, 2017, 51 (3), 302-326

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Related works:
Journal Article: Firm productivity growth and skill (2017)
Working Paper: Firm Productivity Growth and Skill (2015)
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