Firms in big cities hire well and price to compete. Are they better firms?

This study estimates differences in productivity (mfp) across New Zealand urban areas, with a focus on the size of Auckland’s productivity premium. The estimates are based on analysis of firm-level data from Statistics New Zealand’s Longitudinal Business Database. The methods used in the paper overcome some of the biases that arise in standard approaches to spatial productivity estimation - biases arising from imperfect competition, spatial price variation, firm heterogeneity, and labour-sorting across cities. Ignoring these factors leads to biased estimates of the Auckland’s relative productivity performance. The study also investigates industry differences in spatial productivity patterns.

Urban Productivity Estimation with Heterogeneous Prices and Labour (1.4MB)Urban Productivity Estimation Executive Summary (1.5 MB)Author: Dave Maré