Industry productivity and the Australia-New Zealand income gap - NZIER working paper 2011/3

Differences in productivity explain much of the growing income gap between Australia and New Zealand. Good policy responses rely on understanding the sources of these differences. Seventy percent of the aggregate gap in productivity between the two countries is due to underperformance of New Zealand’s industries rather than a difference in the industrial structure of the two countries.

Our findings support the idea of studying and tackling the root causes of productivity differences at the sectoral level. The significant differences in multifactor productivity also indicate the need for more focus on the quality of labour, capital, and management, and regulatory environment.

 

Each year NZIER devotes some of its resources to undertake and make freely available economic research and thinking aimed at promoting a better understanding of New Zealand’s important economic challenges. The preparation of this paper was funded from those resources.