1. Introduction
Labour Productivity in Auckland Firms
Auckland is New Zealand's largest and most densely populated city. Auckland region accounts for 33% of national employment, 40% of value added in the economy, and occupies only 2% of New Zealand's land area. Labour productivity and wages in Auckland region are also higher than in other areas of the country. Wages are around 7% higher,1 average personal income is around 15% higher2 and average labour productivity is around 45% higher.
At the aggregate level, labour productivity measures combine two different concepts: technical efficiency, a measure of how many goods or services a person can produce, and allocative efficiency, a measure of the value of the goods and services that are produced. Auckland's average labour productivity may be higher for various reasons. First, Auckland firms may produce a larger amount of goods and services per worker, either because they use more non-labour inputs (e.g. capital or urban infrastructure) or because they are more efficient at transforming inputs into outputs. A second potential reason for Auckland's labour productivity advantage is that firms may be able to obtain a higher price for the outputs that they produce. Third, Auckland may have a disproportionately high share of its employment involved in industries or activities for which labour productivity would be high in any location (composition effect). The current paper does not fully distinguish between these sources of labour productivity differentials. It does, however, analyse the contribution of differing industry composition, and presents industry-specific analyses that suggest a diversity of causes of Auckland's productivity premium.
The main objective of this paper is to document the extent and nature of Auckland's productivity premium, using a unique firm-level dataset, Statistics New Zealand's prototype Longitudinal Business Database (LBD). In particular, we examine labour productivity differences between the seven territorial authorities within greater Auckland and between the 370 census area units, gauging the extent to which productivity differences can be accounted for by differences in industry composition. We examine the relationship between labour productivity and employment density as one broad indicator of possible agglomeration effects, and examine productivity premia for industries with differing spatial distributions to provide evidence on the presence of both localisation and urbanisation advantages.3 Finally, we present maps of productivity across Auckland, as a first step towards investigating spatial (agglomeration, networks, and infrastructure) explanations of Auckland's performance.
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