Benchmarking MAF Policy’s sector productivity measures
Operational research project code: GIN 726
Understanding the long-term drivers of sector growth requires an understanding of differences between changes in factor inputs and changes in their productive use. A common way to do this is to decompose sector growth into two components: growth in factor inputs and growth in total factor productivity (TFP).
MAF Policy has developed a series of sector TFP index measures but there are a number of approaches that can be used to measure TFP (see "Productivity measurement: alternative approaches and estimates", Mawson et al, New Zealand Treasury Working Paper 03/12). MAF Policy has used an (unchained) Tornqvist method, which the Treasury suggest gives similar results to the chained Fisher index method adopted by the Treasury. In addition, Statistics New Zealand has recently set out their own methodology for their own proposed productivity index estimates.
In order to understand the drivers of growth across sectors we first need to understand and compare measurements of TFP. We also need to be careful in the way we construct TFP measures. In the case of on-farm production, much of recent growth has come from changing management practices, economies of scale, and increased application of inputs such as fertiliser. These factors, some of which are hard to measure, are not usually included as inputs when calculating TFP and are embodied TFP measures. This has implications when developing policies to enhance sector growth and productivity.
MAF Policy wishes to review and update its own methodology relative to that of other government departments and developments internationally.
We are also looking to develop comparable productivity indices for other key sectors, and part of this work should include the recommendation of a methodology and the development of data sources to support this work. For example, we are interested in extending the work on TFP indices from land based sectors to downstream manufacturing and service sectors relevant to agriculture, horticulture and forestry sectors.
Contact:
Kay Cao
Tel: 04 894 0613
Email: kay.cao@maf.govt.nz
Contact for Enquiries
Manager, Innovation Policy
Ministry of Agriculture and Forestry
MAF Policy
PO Box 2526
Wellington
New Zealand
Tel:+64 4 894 0618
Fax:+64 4 894 0741
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