Omitted productivity data: Why haven't economic reforms increased productivity growth in New Zealand?

Debasis Bandyopadhyay

New Zealand Economic Papers, 2005, vol. 39, issue 1, 105-108

Abstract: Crucial data on productivity was omitted from my article titled, “Why Haven't Economic Reforms Increased Productivity Growth in New Zealand?. The data consist of GDP per hour and real earnings per hour as two alternative measures of productivity. More importantly, they are crucial to substantiate the premise of the “productivity puzzle” that the article addresses and represent an alternative source of productivity data that the growth economists in New Zealand typically ignore. Instead, they rely on artificially constructed data on total factor productivity (TFP). However, when it comes to the TFP data the art of construction varies widely. Consequently, economists in New Zealand also struggle to gather consensus on how to interpret those data. In the above paper I argue that such a consensus would be impossible to achieve since the interpretation of the TFP data crucially depends on the specific model that one uses. The data on GDP per hour or real earnings per hour, however, raise far less controversy when one attempts to interpret them in wide varieties of models. Moreover, contrary to the widely held optimism among the policymakers regarding post-reform productivity growth, those less controversial data reveal a puzzling drop in the decade long average productivity growth, following the economic reforms of the late 1980s. My paper published in the December 2004 issue of the NZEP provides an explanation of the puzzle in a neoclassical growth theoretic framework. However, because of the unfortunate omission of the crucial productivity data several economists have questioned my premise of any decline in the trend growth rate of productivity. I have responded to those people who contacted me directly regarding those missing data. However, a widespread use of various types of TFP data that do not capture the puzzle of post reform decline in productivity growth calls for the publication of the omitted data. I hope that future research involving this alternative dataset on productivity would benefit the policy makers by providing a less ambiguous picture of the trend in productivity growth in New Zealand.

Date: 2005
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DOI: 10.1080/00779950509558482

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