Productivity measurement of New Zealand forest harvesting sector using the DEA-Malmquist index

Abstract

ABSTRACT A benchmarking system has been recording logging contract rate (being the agreed $/ton for trees harvested, processed, and loaded out) and productivity for plantation forest harvesting operations in New Zealand over 10 years (2009–2018) with over 1500 unique entries. In this study using the benchmarking database, the pattern and sources of productivity changes are investigated using the data envelopment analysis (DEA)-Malmquist non-parametric frontier technique. Malmquist total factor productivity index is estimated and decomposed into efficiency change index and technological change index. The result indicates that the sector experienced productivity growth over the 10-year period primarily as a result of technological progress rather than efficiency growth. Productivity in New Zealand’s forest harvesting sector was positive, growing at an average rate of 1.7% per annum over the study period. The contribution from efficiency gain to the overall output (system productivity) growth ranged from 7.3% to 19% and that of the technological change was from 1.4% to 26%. Productivity was driven by two components; (1) the technology deployed and (2) the efficiency of the technology. The results of the study show that the productivity growth in the industry is mainly as a result of improved technologies; however, the efficiency of the technologies lag. There are potentials in increasing efficiency of existing technologies, increasing output while reducing or using current input levels; that should be the focus of the industry in order to achieve sustainable growth in productivity.