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Constructing cross country estimates of relative industry MFP levels

Daan Steenkamp

This note describes the construction of estimates of relative levels of multifactor productivity (MFP) in the `traded' and `non-traded' sectors in New Zealand and 18 other economies. Industry comparisons of MFP levels over time are constructed using relative productivity at a base year adjusted for annual industry MFP growth. Relative industry MFP level estimates are grouped together to estimate relative `traded' and `non-traded' levels. The estimates suggest that there are several small industries where New Zealand has relatively high MFP levels. But estimates of New Zealand's overall traded and non-traded MFP suggest that New Zealand has performed poorly relative to its peers over the last several decades. These estimates are useful not only for assessing New Zealand's relative productivity performance, but also for other empirical analysis. Subsequent research uses these estimates to explore the relationship between the real exchange rate and relative traded and non-traded productivity for New Zealand and the other countries included in this study.