Executive Summary
This paper examines the average labour productivity of firms in Auckland, using firm-level microdata from Statistics New Zealand's prototype Longitudinal Business Database. It analyses Auckland's performance relative to other areas of New Zealand, and the relative performance of different areas within Auckland. It assesses the potential influence of industry composition and patterns of employment density in accounting for the observed patterns.
Auckland's productivity premium
Labour productivity is measured as value added per worker, which is 30 to 50 percent higher in Auckland region than in regions outside Auckland. The premium is even higher for Auckland CBD (120 to 150 percent higher). Industry composition differences account for about half of Auckland's higher labour productivity. The remaining premium reflects a combination of technical efficiency (producing more with the same inputs), allocative efficiency (receiving higher output prices or paying lower input prices), and unmeasured inputs (e.g.: capital intensity, labour quality).
Density and productivity
Areas where employment density is higher have higher labour productivity (elasticity of 0.06 to 0.09). This is true when comparing Auckland with other areas, and when comparing areas within Auckland. However, changes in employment density over time do not appear to be associated with changes in labour productivity, weakening the case for a causal relationship.
Localisation and urbanisation
The paper examines whether the positive correlation between labour productivity and employment density is stronger when firms are surrounded by other firms in their own industry (localisation), or reflect more generalised benefits of density (urbanisation). Both appear important, with localisation effects being on average stronger.
Industries that are most concentrated within Auckland and most over-represented in Auckland have the highest productivity premium from operating in Auckland (33%). However, even firms in industries that are neither over-represented in Auckland nor atypically concentrated within Auckland have productivity that is 23% higher than their non-Auckland counterparts.
Back to Top