What drives the productivity growth of New Zealand district health boards: technology, efficiency, or scale?

Abstract

Using the longitudinal data on New Zealand District Health Boards (DHBs) for the period 2011-2018, the total factor productivity (TFP) change and its components are evaluated using an input distance function and a cost function. The empirical results indicate that TFP decreased at an average rate of between 0.73 and 0.98 per cent annually, mainly due to the deterioration of the technological component, which averaged close to −2 per cent between 2011 and 2018. However, contrary to the technological component, the scale component improved every year at an average rate of 1–1.16 per cent, thus cushioning some of the effects of the deteriorating technological component of the TFP. The TFP also posted a one-off positive growth in 2016, following the nationwide implementation of an ‘elective initiative’ programme in the 2015–2016 year, which raised both the scale and efficiency (technical and cost) components to their highest levels. Furthermore, the study also demonstrates the consistency in the effect of scale and technological change components on the TFP under both primal and dual approaches.