On the productive efficiency of Australian businesses: firm size and age class effects

Marc Cowling and George Tanewski ()
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George Tanewski: Deakin University

Small Business Economics, 2019, vol. 53, issue 3, No 11, 739-752

Abstract: Abstract After 26 years of growth, the Australian economy is beginning to show signs of stress and declining productivity. In this paper, we consider aspects of productive efficiency using an Australian business population data set. Using a production function approach, several key findings are uncovered. Firstly, decreasing returns to scale are identified as a significant feature of the Australian business sector. This implies that not all firm growth will lead to productivity gains. Secondly, there are significant differences in the way value added is created between small and large firms. In the largest 25% of firms, the capital contribution to value added is four times that of the smallest 25% of firms. Thirdly, efficiency follows an inverted ‘U’ shaped in firm age with the youngest (0–2 years) and oldest (> 9 years) firms being less productive than the middle 50% of firms. Fourthly, there are also huge industry sector variations in productivity. In particular, financial services appears to be the most productively efficient sector in the Australian economy and mining the least efficient.

Keywords: Productivity; Firm size; Firm age; Capital and labour effects; Technology (search for similar items in EconPapers)
JEL-codes: D21 D22 D24 J24 L23 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s11187-018-0070-0

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