The importance of spatial differences in total factor productivity: New Zealand, 2001-16

Using firm-level panel data and estimating production functions for 37 industries, covering the 2001-16 period, this paper finds that firms in the Wellington region of New Zealand are on average about twice as productive as those in the rest of the South Island (which has the lowest average productivity). As to whether 'place' effects are the major explanation for such spatial differences or if 'firm mix' is more important, this study finds that agglomeration plays only a minor role in determining firm-level productivity levels, while the importance of spatial factors in accounting for the differential between productivity in Wellington and other areas was generally very small.