Abstract

This study has investigated total factor productivity (TFP)-growth of New Zealand’s international education with a view to analysing its economic sustainability. It has used secondary data to calculate the DEA-based Malmquist productivity index for measuring TFP-growth of international education. It has also used the OLS regression model to estimate Cobb-Douglas production function for determining the elasticity of output (GDP) contributed by international education. The study found that New Zealand’s international education sector experienced a positive TFP-growth during 1999-2004 but the TFP-growth had started declining in 2005 and continued to fall through 2010. Both TFP and regression models indicated that this sector exhibited, on an average, a decreasing return to scale during the period 1999-2010. This sector is not economically sustainable because of a current declining trend in TFP-growth caused by technological contraction. Similarly, the output growth is determined by labour not by capital. The government should formulate policy to improve TFP-growth in this sector. The findings of this study may be of interest to researchers, development practitioners and policy makers.