ABSTRACT
The measurement of quality of the labour input is one of the most difficult aspects of growth accounting. Using the Cobb-Douglas form, the traditional production function appears as:
(1)
Thus, economic growth can be represented as:
(2)
New Zealand data indicate that both K and L (measured as hours worked) have been increasing in recent years, hence the productivity puzzle - economic growth appears to be largely explained by the increased quantity of inputs, rather than by their better use. This seems inconsistent with the extent of economic reforms undertaken in New Zealand. The New Zealand puzzle is the reverse of the more usual problem of growth accounting, where increase in the volume of inputs leaves a large unexplained residual in the above equation.
