Productivity distribution and drivers of productivity growth in the construction industry

Productivity    
has risen. Thank entry and    
reallocation.    

The construction industry contributes a large and growing share of the New Zealand economy, with total employment rising to almost 10% and value added (GDP contribution) rising to about 9% by 2012. While aggregate statistics have raised some concerns about poor construction productivity, the New Zealand construction industry is not an underperformer when looked at through the lens of individual firms.

Using firm-level data, this study finds that over the period 2001–2012, labour productivity of the average firm in the construction industry grew by 1.7 percent annually and MFP by 0.5 percent annually, compared with 0.5 and 0.1 percent annually respectively for the overall measured sector.

Within the construction industry, productivity growth rates vary markedly by sub-industry and other firm characteristics. Labour productivity is more widely dispersed than is MFP. High-productivity firms tend to be younger, more likely to be a new start-up, to belong to a business group, and to locate in Auckland than low-productivity firms. Working-proprietor-only firms are slightly less productive on average than employing firms, while displaying more productivity dispersion (both more high productivity firms and more low productivity firms).