bluuebunny/crossref_metadata_2025 huggingface dataset:
Trading Efficiency in Water Quality Trading Markets: An Assessment of Trade-Offs
Authors:   Motu Economic and Public Policy Research, McDonald Hugh , Kerr Suzi
Published: April 2018

Declining water quality as a result of increased nutrient leaching is a serious and growing concern, both internationally and in New Zealand. Water pollution issues have traditionally been addressed with command-and-control type regulation, but market-based nutrient trading schemes are becoming more widespread. In New Zealand, a cap-and-trade system has been implemented in Lake Taupo and another has been designed for Lake Rotorua. Despite the importance placed on avoiding transaction costs in water quality trading markets, there has been little discussion in the literature of practical policies to decrease these transaction costs, or any real assessment of when it is and is not optimal to decrease transaction costs. This paper begins to address these issues. We find that strong efforts to control time-of-trade transaction costs are most likely to be worthwhile in schemes with heterogeneous participants and large expected values and volumes of trading. The trading inefficiency that results from search and bargaining, and trade registration costs can be minimised at some cost. Regulators can reduce trade approval costs if they establish baseline leaching levels for all participants and design standardised leaching monitoring systems as part of the set-up of the system, and monitor all sources equally regardless of whether participants trade instead of estimating and approving changes in traders leaching at the time of each trade (as occurs in a baseline-and-credit system). Finally we find that while regulators may be tempted to restrict trading or increase measuring and monitoring requirements to increase the environmental certainty of a schemes outcome, environmental risk may be better addressed through a less certain but more stringent environmental target.
The Effect of Transport Infrastructure on Home Production Activity: Evidence from Rural New York, 18251845
Authors:   Motu Economic and Public Policy Research, Coleman Andrew
Published: April 2018

This paper examines the home production activities of newly formed and long established households in rural New York over a twenty year period after the Erie Canal was built. It shows that newly established households had lower home production activities than long established households resident in the same area, conditional on the size, age, and land-owning characteristics of the households. Thus some of the decline in aggregate production was due to the arrival of new, differently behaving households, rather than changing behaviour of established households. However, long established households eventually copied their new neighbours, reducing their home production activities to similar levels.
The Relationship between Individual Labour Market Outcomes, Household Income and Expenditure, and Inequality and Poverty in New Zealand from 1983 to 2003
Authors:   Motu Economic and Public Policy Research, Stillman Steven , Le Trinh , Gibson John , Hyslop Dean , Maré David. C.
Published: April 2018

This paper investigates the relationship between individual labour market outcomes, household income and expenditure, and inequality and poverty in New Zealand using detailed data from the 1983/84  2003/04 Household Economic Survey (HES). We begin by discussing and summarising measures of income and expenditure calculated from the HES. We next examine the relationship between individual labour market outcomes, and household income and expenditure for households with different characteristics. In particular, we focus on how this relationship varies over the life cycle and over time. This analysis is then extended to examine inequality in labour market outcomes, household income and household expenditure. In the last section, we examine the determinants of the levels and changes in poverty in New Zealand using both expenditure and income data. We also apply a newly developed methodology for combining income and expenditure data to produce poverty indicators.
Cooperation to Reduce Developing Country Emissions
Authors:   Motu Economic and Public Policy Research, Kerr Suzi , Millard-Ball Adam
Published: April 2018

Without effective developing country participation in climate mitigation it will be impossible to meet global concentration and climate change targets. However, developing countries are unwilling and, in many cases, unable to bear the mitigation cost alone. They need huge transfers of resources  financial, knowledge, technology, and capability  from industrialised countries. In this paper, we evaluate instruments that can induce such resource transfers, including tradable credits, mitigation funds and results-based agreements. We identify key constraints that affect the efficiency and political potential of different instruments, including two-sided private information leading to adverse selection, moral hazard and challenging negotiations; incomplete contracts leading to under-investment; and high levels of uncertainty about emissions paths and mitigation potential. We consider evidence on the poor performance of current approaches to funding developing country mitigation  primarily purchasing offsets through the Clean Development Mechanism  and explore to what extent other approaches can address problems with offsets. We emphasise the wide spectrum of situations in developing countries and suggest that solutions also need to be differentiated and that no one policy will suffice: some policies will be complements, while others are substitutes. We conclude by identifying research needs and proposing a straw man to broaden the range of contracting options considered.
Cyclical Labour Market Adjustment in New Zealand: The Response of Firms to the Global Financial Crisis and its Implications for Workers
Authors:   Motu Economic and Public Policy Research, Fabling Richard. , Maré David. C.
Published: April 2018

This paper examines the dynamics of employment adjustment in New Zealand, focusing on the response of firms to the 2008/09 Global Financial Crisis. We use data from Statistics New Zealands prototype Longitudinal Business Database (LBD) to examine firms employment responses to output shocks before and after the crisis, and to investigate variations in job and worker flows. We discuss the resilience of the NZ labour market to economic shocks, and the possible role of labour market policy settings. Finally, we discuss preliminary findings on the differential impact of labour market adjustment on workers  by earnings level, age, gender, and tenure  and outline potential further work along these lines. Our analysis of firm microdata highlights three key features of New Zealand labour market adjustment to the 2008/09 crisis. First, there was considerable heterogeneity across firms, both before and after the crisis, in the size of output shocks that firms faced, the amount of employment adjustment in response to any given output shock, and in the size of worker flows given the firms employment adjustment. Second, the crisis not only moved the distribution of output shocks faced by firms, but also altered the relationship between output shocks and changes in job and worker flows and employment. Third, the impact of the observed firm-level dynamics had an uneven impact on workers, with greater employment losses for low wage workers, young workers, and workers with low job tenure.
Book Translations as Idea Flows: The Effects of the Collapse of Communism on the Diffusion of Knowledge
Authors:   Motu Economic and Public Policy Research, Abramitzky Ran , Sin Isabelle
Published: April 2018

We use book translations as a new measure of international idea flows and study the effects of Communisms collapse in Eastern Europe on these flows. Using novel data on 800,000 translations and difference-in-differences approaches, we show that while translations between Communist languages decreased by two thirds with the collapse, Western-to-Communist translations increased by a factor of five and quickly converged to Western levels. Convergence was more complete in more economically-useful fields such as the sciences, and was more complete in Satellite than in Soviet countries. These findings help us understand how institutions shape the international diffusion of knowledge.
Gradual Land-use Change in New Zealand: Results from a Dynamic Econometric Model
Authors:   Motu Economic and Public Policy Research, Kerr Suzi , Olssen Alex
Published: April 2018

Rural land use is important for New Zealands economic and environmental outcomes. Using a dynamic econometric model and recent New Zealand data, we estimate the response of land use to changing economic returns as proxied by relevant commodity prices. Because New Zealand is small, export prices are credibly exogenous. We show that land use responses can be slow. Our result implies that policy-induced land-use change is likely to be slow or costly.
A Forest-Profit Expectations Dataset for New Zealand, 19902008
Authors:   Motu Economic and Public Policy Research, Olssen Alex , Zhang Wei , Evison David , Kerr Suzi
Published: April 2018

In this paper, we construct a dataset of annual expected forest profits in New Zealand from 19902008 at a fine spatial resolution. We do not include land values in any of our profit calculations. We estimate four measures of expected forest profits based around net present value (NPV), land expectation value (LEV), equal annual equivalent (EAE), and internal rate of return (IRR). Our estimates of expected profits are based on the assumption that land owners form their expectations adaptively; that is, they use recent data on prices and costs to form expectations. We illustrate our data by showing regional variation in each of our measures, changes over time in NPV on land in forest in 2008, and variation in NPV over space in 2008. The final dataset, working datasets, and the code used in this work are publicly available to the research community and can be accessed from the authors website: http://www.motu.org.nz/building-capacity/dataset/u10073_forest_profit_expectations_dataset.
Price, Quality, and International Agricultural Trade
Authors:   Motu Economic and Public Policy Research, Woods Darian , Coleman Andrew
Published: April 2018

The average value of a particular class of agricultural exports varies widely across different destinations. This raises the question: in the event of a supply shock, such as the implementation of the Emissions Trading Scheme, can farmers offset higher costs by raising their average prices by contracting exports to lower value destinations? If the difference in value reflects different prices because producers have market power, the answer will be yes. If the difference in value reflects differences in the quality of goods exported to different destinations, the answer is no. This paper use a variety of trade data and techniques to examine which explanation is most likely to be relevant. While the answers are not definitive, there is little support for the hypothesis that exports are curtailed.
Does Money Buy Me Love? Testing Alternative Measures of National Wellbeing
Authors:   Motu Economic and Public Policy Research, Grimes Arthur , Oxley Les , Tarrant Nicholas
Published: April 2018

Many aggregate measures of wellbeing and sustainability exist to guide policy-makers. However, the power of these aggregate measures to predict objective wellbeing outcomes has received little comparative testing. We compile and compare a range of aggregate wellbeing measures including: material measures (e.g. Gross Domestic Product per capita), surveyed measures (e.g. life satisfaction) and composite measures (e.g. Human Development Index) covering a range of countries. We test the predictive power of wellbeing measures for an objective indicator of how people value countries relative attractiveness. The objective indicator is net migration over a fifty year timespan, indicating peoples revealed preference (re)location choices. The paper examines relationships amongst cross-country wellbeing and sustainability measures; and examines how New Zealand compares with other countries according to these measures. Based on models of spatial (dis)equilibrium and migration, we present tests of the predictive power of alternative aggregate measures for international migration outcomes. We find that both material and life satisfaction outcomes are important determinants of the choice to migrate.
Spatial and Temporal Responses to an Emissions Trading System Covering Agriculture and Forestry: Simulation Results from New Zealand
Authors:   Motu Economic and Public Policy Research, Kerr Suzi , Anastasiadis Simon , Olssen Alex , Power William , Tímár Levente , Zhang Wei
Published: April 2018

We perform simulations using the integrated Land Use in Rural New Zealand (LURNZ) model to analyse the effect of various New Zealand emissions trading scheme (ETS) scenarios on land-use, emissions, and output in a temporally and spatially explicit manner. We compare the impact of afforestation to the impact of other land-use change on net greenhouse gas emissions, and evaluate the importance of the forestry component of the ETS relative to the agricultural component. We also examine the effect of land-use change on the time profile of net emissions from the forestry sector. Our projections for the mid-2020s suggest that under a comprehensive ETS, sequestration associated with new planting could be significant; it may approach 20 percent of national inventory agricultural emissions in 2008. Most of this is driven by the reward for forestry rather than a liability for agricultural emissions. Finally, we present projections of future agricultural output under various policy scenarios.
Pension Payments and Receipts by New Zealand Birth Cohorts, 19161986
Authors:   Motu Economic and Public Policy Research, Coleman Andrew
Published: April 2018

This paper analyses how much different cohorts can expect to contribute into the PAYGO-funded New Zealand Superannuation scheme, and contrasts it with the amount each cohort can be expected to obtain in benefits if the current scheme is continued. The analysis is based on historic census and contributions data and SNZ projections of future population trends. The results show that cohorts born prior to 1980 can expect to pay half as much as they can expect to get in retirement benefits, because of the small number of pension recipients when they made the bulk of their payments.
The Economics of International Policy Agreements to Reduce Emissions from Deforestation and Degradation
Authors:   Motu Economic and Public Policy Research, Kerr Suzi
Published: April 2018

This paper provides a synthesis of the key conceptual insights from economics that can contribute to the design of effective, efficient, and fair international policy that creates incentives and strengthens capability to reduce deforestation and forest degradation and promote reforestation (REDD+ in United Nations terminology) as part of the international climate change mitigation effort. Most of the emphasis is on the contribution of economics to effective design of results-based policies that introduce a price incentive for strong states to address deforestation, degradation, and reforestation. The paper emphasizes the value of large-scale agreements to minimize leakage and adverse selection, the importance of allocating uncertainty with care, and the need to differentiate clearly among potentially conflicting objectives. It explores the conflicts between cost sharing and efficiency that arise because of private information and the inability of states to make long-term commitments. It also canvasses policies that complement price incentives, and, for weak states only, substitutes for results-based agreements.
Performance Pay Systems and the Gender Wage Gap
Authors:   Motu Economic and Public Policy Research, Fabling Richard , Grimes Arthur , Maré David C.
Published: April 2018

We examine the relationship between performance pay systems and wages, paying particular attention to gender differences in outcomes. At the firm level, estimates suggest average wages are unaffected by changes in performance pay practices, but that the within-firm distribution of wages is stretched. This latter result is explained by worker-level regressions, showing that male workers with initially higher expected wages are more likely to benefit from increased use of performance pay in the firm. Given the apparent absence of such an effect on female wages and the concentration of prime-age men in the top quartile of the wage distribution, women, on average, benefit less from the operation of performance pay systems.
Export Performance, Invoice Currency, and Heterogeneous Exchange Rate Pass-Through
Authors:   Motu Economic and Public Policy Research, Fabling Richard , Sanderson Lynda
Published: April 2018

Using comprehensive, shipment-level merchandise trade data, we examine the extent to which New Zealand exporters maintain stable New Zealand dollar prices by passing on exchange rate changes to foreign customers. We find that the extent to which firms absorb exchange rate fluctuations in the short run is significantly related to both invoice currency choice and exporter characteristics when these are analysed separately. However, when jointly accounted for, the role of exporter characteristics largely disappears. That is, some firm types are more inclined to invoice in the New Zealand dollar, while others use either the importer or a third currency. In the short run, this translates into differences in exchange rate pass-through because of price rigidity in the invoice currency. Differences across invoice currencies diminish, but do not disappear, over time as prices adjust to reflect bilateral exchange rate movements.
A New Zealand Regional Housing Model
Authors:   Motu Economic and Public Policy Research, Grimes Arthur , Hyland Sean , Coleman Andrew , Kerr James , Collier Alex
Published: April 2018

The New Zealand Regional Housing Model (NZRHM) includes estimated equations for four key housing market variables: house prices, housing supply (new dwelling consents), residential vacant land (lot) prices, and average rents. Long run (cointegration) relationships and short run (error correction) relationships are estimated for each of these variables across 72 TLAs within New Zealand. The model is designed so that it can be used for short to medium term forecasting. It is also useful for simulating the effects of shocks to the housing market. The paper presents simulations of the impacts of shocks to exogenous variables (population, credit restrictions, construction costs and farm prices) as well as shocks to policy variables (developer contributions, accommodation supplement, and land availability). We also simulate the consequences of the Christchurch earthquakes for Canterbury housing outcomes. The over-arching conclusion across all simulations is that housing markets are very slow to adjust to disequilibria, such that exogenous shocks have very long lasting effects on prices and the housing stock.
The Costs of Involuntary Job Loss: Impacts on Workers Employment and Earnings
Authors:   Motu Economic and Public Policy Research, Dixon Sylvia , Maré David C.
Published: April 2018

This paper examines the incidence of involuntary job loss and its impact on the employment and earnings of affected workers, using data from the Survey of Families, Incomes and Employment (SoFIE) for the 200209 period. It focusses on employees who had been working in their job for at least one year before the job loss. The impact of displacement on employment and earnings was estimated by using a propensity score-matching approach to select similar non-displaced workers and then compare their outcomes. We find that the employment rate of displaced workers was on average 27 percentage points lower 01 years after displacement, 14 percentage points lower 12 years after, and 8 percentage points lower 23 years after, than that of the matched comparison group. The average wage of re-employed displaced workers was 12 percent lower 01 years after displacement, 11 percent lower 12 years after and 7 percent lower 23 years after. Other impacts included increases in unemployment and self-employment, reductions in average weekly hours, and reductions in weekly and annual earnings.
Investigation of Options for a New Longitudinal Household Survey: Issues and Options Paper
Authors:   Motu Economic and Public Policy Research, Crawford Ron , Maré David C.
Published: April 2018

We examine arguments for a new Longitudinal Household Survey (LHS) in New Zealand, and design and governance arrangements that would best realise the value of a new LHS. Other instruments such as cohort studies, cross-sectional surveys, the census and longitudinally linked administrative data will only go part way in filling the gap left by the end of SoFIE (Survey of Family Income and Employment Dynamics). There are some key areas of social science and policy focus, such as the dynamics, causes and consequences of poverty spells, that will only ever be clarified by data from an LHS. In addition, a purpose-designed LHS will enable a wide range of phenomena to be investigated in a multidisciplinary and household context using internationally comparable concepts that can be supplemented over time in response to emerging issues. The next step is to define a specific option for a new LHS, and evaluate prospective research and policy benefits against the costs.
The Impact of Wage Subsidies on Jobseekers' Outcomes and Firm Employment
Authors:   Motu Economic and Public Policy Research, Crichton Sarah , Maré David C.
Published: April 2018

The study examines the impact of wage subsidies on assisted jobseekers and on the firms that employ them, using propensity matching methods. Overall we find that starting a subsidised job leads to significant employment and earning benefits for assisted jobseekers over several years. Subsidised workers are disproportionately hired into expanding firms, though we cannot determine whether the expansion would have occurred in the absence of the subsidy.
Firm-level Hiring Difficulties: Persistence, Business Cycle and Local Labour Market Influences
Authors:   Motu Economic and Public Policy Research, Fabling Richard , Maré David C.
Published: April 2018

We examine the correlates of reported hiring difficulties at the firm level using linked employer-employee and panel survey data over 2005-2011, focussing on the relative influence of firm-level characteristics, persistence, the business cycle and local labour market liquidity. At both the aggregate and the firm level, hiring difficulties eased after the onset of the Global Financial Crisis. Even in the presence of large cyclical changes in demand and labour market conditions, firm-level persistence is a dominant feature of the data, with one- and two-year lags of reported hiring difficulties both positively related to current difficulties. Firms paying higher wages are more likely to report difficulties when trying to hire skilled workers, while firms with more long tenure workers are less likely to report any difficulty hiring. Local labour market conditions appear unrelated to reported hiring difficulties.
A New Zealand Urban Population Database
Authors:   Motu Economic and Public Policy Research, Grimes Arthur , Tarrant Nicholas
Published: April 2018

This paper documents a comprehensive database for the populations of 60 New Zealand towns and cities (henceforth towns). Populations are provided for every tenth year from 1926 through to 2006. New Zealand towns have experienced very different growth rates over this period. Economic geography theories posit that people migrate to (and from) places according to a few key factors. In order to analyse the determinants of urban growth empirically, we need a comprehensive database of urban populations over time, as provided here.
The incidence and persistence of cyclical job loss in New Zealand
Authors:   Motu Economic and Public Policy Research, Maré David C. , Fabling Richard
Published: April 2018

In New Zealand, the impact of the 20072008 Global Financial Crisis (GFC) was milder than in most other developed countries, though still substantial, with employment declining by 2.5 percent between the fourth quarter of 2008 and the fourth quarter of 2009. There were pronounced declines in job and worker turnover rates, signalling a decline in labour market liquidity and difficulties for new entrants and high-turnover groups of workers (Fabling and Maré, 2012). The current paper documents the extent and composition of employment change between 2000 and 2011, focusing particularly on the 20082010 period, when the labour market impacts of the GFC were strongest. As in previous downturns, the incidence of cyclical job loss and unemployment has fallen disproportionately on young and unskilled workers. The paper identifies, for subgroups of workers identified by age, gender and earnings level, the sensitivity of employment growth and labour market flows to aggregate employment fluctuations and also to relative fluctuations across industries and local labour market areas. The rate of job accessions (hiring) is particularly sensitive to the economic cycle and most strongly for young workers. Most of the differences across groups in the size of cyclical employment fluctuations are due to differing responsiveness to common shocks and not to exposure to different industry and local shocks. Finally, the paper traces outcomes for workers whose jobs end, summarising their duration out of work and the wage increases or reductions they experience when they secure employment. Workers who left or lost jobs spent longer out of work after the GFC and settled for lower earnings growth when they did find a job. Both of these effects had partly but not fully abated within 3 years of the onset of the GFC.
Value and Culture
Authors:   Motu Economic and Public Policy Research, Allan Corey , Grimes Arthur , Kerr Suzi
Published: April 2018

This paper seeks to clarify the understanding of value in the cultural context, using economics concepts. We develop an economic framework for thinking about value in the cultural context and discuss how well various valuation techniques are able to account for such values. We also discuss why actual outcomes for the production of cultural and heritage services may differ from what would be considered optimal in the economic context. The aim is to outline a framework which can assist policy makers in the cultural sector to intervene more cost-effectively and be more conscious of trade-offs amongst different cultural values.
Passing the Buck: Impacts of Commodity Price Shocks on Local Outcomes
Authors:   Motu Economic and Public Policy Research, Grimes Arthur , Hyland Sean
Published: April 2018

The extent to which exogenous international agricultural price fluctuations are internalised by rural communities is of major interest for policy-makers concerned with regional economic performance. So too is the link between rural sector performance and urban outcomes, especially in agriculturally-based economies. Through vector autoregressive (VAR) modelling we estimate the causal effect of exogenous commodity price innovations on both rural and urban community outcomes. Our analysis demonstrates that restricting the focus to national effects may lead to incorrect inference. We therefore extend the analysis to a VAR using panel data covering all New Zealand districts over 19912011. House prices and housing investment are used as quarterly indicators of regional economic and population outcomes. By exploiting the variation in production bundles across communities we find that an increase in commodity prices leads to a permanent increase in housing investment and house prices across the country. However, we find that rural communities are relatively insulated from commodity price shocks, whereas urban areas are most affected by commodity price shocks. We discuss the reasons why this paradoxical result may arise.
Mitigation and Heterogeneity in Management Practices on New Zealand Dairy Farms
Authors:   Motu Economic and Public Policy Research, Anastasiadis Simon , Kerr Suzi
Published: April 2018

Pastoral farming can result in adverse environmental effects such as nitrogen leaching and greenhouse gas emissions. However, the cost of mitigation and hence the socially appropriate level of tolerance for environmental effects is still unclear. Research to date within New Zealand has either estimated the costs of specific mitigation technologies or used simulation modelling at a farm scale. This is limited for two key reasons: neither approach uses data from actual implementation of technologies and practices on real farms and hence costs are speculative; and both largely treat farms as homogenous when in reality they vary greatly. We use data on 264 farms to estimate a distribution of farm management residuals in how efficiently nitrogen leaching and greenhouse gas are used to generate production. We interpret this distribution as a measure of the potential for feasible, relatively low-cost mitigation to take place as less efficient farmers move toward existing best practice. We can explain only 48% percent of the OVERSEER-modelled variation in New Zealand dairy farms nitrogen use efficiency based on geophysical factors, specific mitigation technologies and practices that move emissions across farms such as wintering off animals. This suggests a potentially large role for management factors and farmer skill. In contrast, OVERSEER-modelled variation in greenhouse gas use efficiency is more easily explained by the observable factors (73%) but the potential for mitigation through management changes is still not insignificant. Using management practices that are already in commercial use, this first study using this approach suggests that improvements in nitrogen use efficiency may be able to reduce leaching by more than 30 percent, while improvements in greenhouse gas use efficiency may be able to reduce emissions by more than 15 percent; the potential varies considerably across farms.
Housing Market Dynamics and the GFC: The Complex Dynamics of a Credit Shock
Authors:   Motu Economic and Public Policy Research, Grimes Arthur , Hyland Sean
Published: April 2018

We analyse the multiple channels of influence that GFC-induced credit restrictions had on New Zealands subnational housing markets. Our model isolates dynamics caused by impacts on the supply and the demand sides of the market. These dynamics are compared to those caused by a migration shock, a more common form of housing shock in New Zealand. We focus on the impacts on two outcome variables: house prices and housing supply; both shocks cause substantial cyclical adjustments in each variable. Similar cyclical dynamics could complicate the conduct of macro-prudential policies which are designed to affect bank credit allocation.
Managing Risks and Tradeoffs Using Water Markets
Authors:   Motu Economic and Public Policy Research, Kerr Suzi
Published: April 2018

Risk (and often the certainty) of adverse environmental outcomes motivates environmental regulation; other risks also affect welfare outcomes. Economic instruments are one way to reduce environmental risk while maintaining flexibility that helps manage other risks. However regulation not only mitigates risks, it also creates them. While the literature has explored some aspects of risk and economic instruments in great detail, other risks have been largely ignored. Actual and perceived risks are often a barrier to the use of economic instruments so, where they are appropriate, it would be valuable to pay more attention to mitigating risks and demonstrating that they can be mitigated. This note creates a framework for synthesising experience with economic instruments for managing risks relating to water quantity and quality and illustrates it with two New Zealand case studies for which detailed information is available. It also explores some linkages between economic instruments that are not primarily directed at water management  for example emissions trading - and water management outcomes. The surprising outcomes illustrate the importance of context for assessing impact and risk.
Estimating Firm-Level Effective Marginal Tax Rates and the User Cost of Capital in New Zealand
Authors:   Motu Economic and Public Policy Research, Fabling Richard , Gemmell Norman , Kneller Richard , Sanderson Lynda
Published: April 2018

Effective marginal tax rates (EMTRs) can be very different from the statutory rate and vary across firms, reflecting such factors as the extent and nature of taxable deductions (losses, depreciation), asset and ownership structures, and debt/equity financing. We estimate firm-specific EMTRs and related user cost of capital (UCC) measures allowing for shareholder-level taxation using data for 2000-2010 from the Longitudinal Business Database. Examining distributions of various UCC measures we find substantial firm-level heterogeneity, systematic changes as a result of tax reforms between 2004 and 2011, and systematic differences between foreign-owned and domestically-owned firms. Choices among alternative UCC measures make a difference to interpretations.
Sources of international investment data in the Longitudinal Business Database
Authors:   Motu Economic and Public Policy Research, Sanderson Lynda
Published: April 2018

The Longitudinal Business Database (LBD) links together firm-level data held by Statistics New Zealand from a combination of administrative and survey data sources. This linking has opened up a wide range of research opportunities. In many cases, there are now multiple sources of information on a single area of firms' activities, often capturing different aspects or a different population, requiring a choice to be made about the most appropriate source of data for any given research question. This note outlines the available firm-level data sources for research on foreign direct investment, describes the data available, and sets out some of the opportunities and challenges for using these data for research purposes. It also provides detail on maintenance procedures for one of the core elements of the LBD, the Longitudinal Business Frame, which is applicable to a wide variety of firm-level research topics.
Over the Hedge: Do Exporters Practice Selective Hedging?
Authors:   Motu Economic and Public Policy Research, Fabling Richard , Grimes Arthur
Published: April 2018

What determines exporters exchange rate hedging decisions and do exporters attempt to time the market? We use a unique unit record longitudinal administrative dataset on firm exports to find the determinants of exporters currency hedging choices. Determinants include financial fragility, prior hedging experience, and natural hedge opportunities. In addition, firms alter their hedging ratios when the currency has recently trended in one direction. We test whether such behaviour reflects firm characteristics (such as pricing power). We find that these responses are ubiquitous for all but large firms and for all times other than when the exchange rate is near its extreme high or low historical values. These results are consistent with most firms practicing selective hedging (market timing) behaviour that reflects a belief in exchange rate momentum effects. However, this behaviour appears sub-optimal since momentum effects are statistically absent from the underlying exchange rate data.
Four Lectures on Central Banking
Authors:   Motu Economic and Public Policy Research, Grimes Arthur
Published: April 2018

These four lectures on central banking topics were presented in London between September and December 2013. The lectures were delivered as part of Arthur Grimes NZ-UK Link Foundation Visiting Professorship, based at the University of Londons School of Advanced Study. They followed his stepping down as Chair of the Reserve Bank of New Zealand in September 2013 after ten years in that role. The four lecture topics (and the institution at which they were delivered) are: Inflation Targeting: 25 Years Experience of the Pioneer (Bank of England); A Floating Exchange Rate is the Worst Exchange Rate Regime (except for all the others that have been tried) (University College London); How Prudent are Macroprudential Policies? (London School of Economics); Responsibility and Accountability in the Financial Sector (Institute of Advanced Legal Studies). A key theme across all four lectures is the importance of ensuring that central bank policies and actions are time consistent. Time consistency requires that a central bank can commit to implementing the policies that it says it will implement. For instance, if a central bank commits to delivering low inflation, it will not use its powers to deliver other goals at the expense of low inflation. Similarly, if it commits not to bail out banks in the event of failure, then it (and other official bodies) will not bail out a failed bank.
Land-use Intensity and Greenhouse Gas Emissions in the LURNZ Model
Authors:   Motu Economic and Public Policy Research, Timar Levente , Kerr Suzi
Published: April 2018

This paper documents the development of new land-use intensity and greenhouse gas (GHG) emissions modules for the Land Use in Rural New Zealand (LURNZ) model. These modules translate simulated land-use outcomes into measures of rural economic activity and greenhouse gas emissions for dairy farming and sheep-beef farming. Emissions in LURNZ include those from livestock as well as from synthetic fertiliser use. We utilise the latest set of emission factors along with information on the distribution of rural activities to model GHG emissions in a spatially and temporally explicit manner. Our results at the national level are approximately consistent with New Zealands Greenhouse Gas Inventory.
Diffusion of Green Technology: A Survey
Authors:   Motu Economic and Public Policy Research, Allan Corey , Jaffe Adam B. , Sin Isabelle
Published: April 2018

This paper surveys the existing literature on diffusion of environmentally beneficial technology. Overall, it confirms many of the lessons of the larger literature on technology diffusion: diffusion often appears slow when viewed from the outside; the flow of information is an important factor in the diffusion process; networks and organisations can matter; behavioural factors such as values and cognitive biases also play a role. With respect to policy instruments, there is some evidence that the flexibility of market-based instruments can have a beneficial impact on technology diffusion, but there are also numerous cases in which regulations have forced the adoption of new technologies. There would be significant benefit to increased investment in studies that look at questions such as the role of information provision, networks and framing issues in households and firms adoption decisions.
Greenhouse Gas Emissions in New Zealand: A Preliminary Consumption-Based Analysis
Authors:   Motu Economic and Public Policy Research, Romanos Carl , Kerr Suzi , Will Campbell
Published: April 2018

New Zealands per capita greenhouse gas emissions are usually calculated by taking total emissions as reported under the Kyoto Protocol or the United Nations Framework Convention on Climate Change and simply dividing by population. However this focuses on emissions associated with production within New Zealand. From the point of view of individuals, these are not the emissions they control, and hence can mitigate. Individuals can calculate their carbon footprint but tools to do this typically focus on a few categories of emissions (mostly electricity, direct fuel use and waste) and emissions footprints are not available for a wide range of households so cannot be used for comparative analysis. This paper explores how the carbon emissions related to the consumption categories of households in New Zealand vary with household characteristics. We use product consumption data from the 2007 Household Economic Survey. Consumption within each category is linked to a carbon intensity multiplier (tonnes of carbon dioxide equivalent per dollar of consumption) which is derived from: the official 2007 inputoutput table of 106 industries produced by Statistics New Zealand; energy data on carbon dioxide per petajoule of fuel in each industry from the Energy Data File; and the Energy Greenhouse Gas Emissions Report both provided by the Ministry of Business, Innovation and Employment. Previous literature has used similar methods to calculate the incidence of a carbon tax (e.g. Creedy and Sleeman [2006]). This paper uses these methods in order to study which sectors of household expenditure offer the greatest opportunities for mitigation and how these opportunities vary with household characteristics such as income decile, region and household composition.
Culture, Beliefs and Economic Performance
Authors:   Motu Economic and Public Policy Research, Di Tella Rafael , MacCulloch Robert
Published: April 2018

Beliefs are one component of culture. Data from the World Values Survey is available on a subset of beliefs concerning (broadly) meritocracy and poverty that appear relevant for economics. We document how they vary as well as their distribution across countries. We then correlate these measures of beliefs with economic growth and compare them with institutional and geographical determinants of income. A strong negative relationship is found between leftist economic beliefs and growth but little evidence is found of a relationship with respect to non-economic beliefs. Finally, we briefly discuss some causal effects on beliefs. The evidence suggests that higher country risk and more dependence on natural resources shifts nations to a more leftist set of economic beliefs. Overall the evidence supports the view that cultural specificities may explain why certain institutions cannot be transplanted between nations with different cultural histories and underlines the limit to policy activism.
Land Use in Rural New Zealand: Spatial Land Use, Land-use Change, and Model Validation
Authors:   Motu Economic and Public Policy Research, Anastasiadis Simon , Kerr Suzi , Zhang Wei , Allan Corey , Power William
Published: April 2018

Land is an important social and economic resource. Knowing the spatial distribution of land use and the expected location of future land-use change is important to inform decision makers. This paper documents and validates the baseline land-use maps and the algorithm for spatial land-use change incorporated in the Land Use in Rural New Zealand model (LURNZ). At the time of writing, LURNZ is the only national-level land-use model of New Zealand. While developed for New Zealand, the model provides an intuitive algorithm that would be straightforward to apply to different locations and at different spatial resolutions. LURNZ is based on a heuristic model of dynamic land-use optimisation with conversion costs. It allocates land-use changes to each pixel using a combination of pixel probabilities in a deterministic algorithm and calibration to national-level changes. We simulate out of sample and compare to observed data. As a result of the model construction, we underestimate the churn in land use. We demonstrate that the algorithm assigns changes in land use to pixels that are similar in quality to the pixels where land-use changes are observed to occur. We also show that there is a strong positive relationship between observed territorial-authority-level dairy changes and simulated changes in dairy area.
Natural Selection: Firm Performance Following the Canterbury Earthquakes
Authors:   Motu Economic and Public Policy Research, Fabling Richard , Grimes Arthur , Timar Levente
Published: April 2018

The Canterbury earthquakes in September 2010 and February 2011 caused major upheaval to the people of the region. The second quake killed 185 people, forced many from their homes, and closed Christchurchs central business district. This paper examines the consequential effects on business in the region, paying particular attention to heterogeneity in firm-level outcomes. Consistent with aggregate statistics, we quantify substantial variation in firm outcomes by industry and by location. In addition, we show that firms prior financial viability heavily influenced their chance of survival. Conditional on continuing to operate, average profitability returned to pre-quake levels relatively quickly, albeit subject to reduced inputs. Taken together, these effects support economic models where firm exit is driven by selection on profitability.
Going to the Source: Using an Upstream Point of Regulation for Energy in a National Chinese Emissions Trading System
Authors:   Motu Economic and Public Policy Research, Kerr Suzi , Duscha Vicki
Published: April 2018

There are many choices within the design of an emissions trading system. In this paper we focus on one specific aspect  the point of regulation for the energy sector. This choice affects transaction costs; comprehensiveness, and hence the amount of emissions covered and the extent to which the potential cost-effectiveness gains are realised; and credibility of the system. We discuss how an upstream energy sector emissions trading system works and present arguments for going upstream (in particular, simplicity of administration) while also discussing arguments for other points of regulation in light of the Chinese circumstances. We present experiences with the New Zealand system, the only system that is entirely upstream for energy, showing ways to address issues that may arise with an upstream system. Ultimately the success of emissions trading depends on markets that operate in a relatively free and competitive way. Simply copying others systems to the context of a largely controlled economy such as the Chinese one is likely to be ineffective; each system must be uniquely tailored to local circumstances, possibly in China more than ever before.
Earnings and Employment in Foreign-owned Firms
Authors:   Motu Economic and Public Policy Research, Maré David C. , Sanderson Lynda , Fabling Richard
Published: April 2018

This paper examines remuneration and labour mobility patterns among workers in foreign-owned firms operating in New Zealand. By tracking workers as they move across jobs in different types of firms, we document the extent of the foreign wage premium, distinguishing between compositional factors (e.g., differences in industry and employment composition across foreign and domestic firms) and remaining differences in wage levels and growth rates. We find that much of the average earnings gap between foreign- and domestically-owned firms is due to compositional factors -- foreign firms tend to be larger and employ workers who would have received relatively high wages regardless of where they worked. However, even among apparently similar workers and firms, we find a two to four percent earnings gap between workers in domestic and foreign-owned firms. This gap is primarily associated with a wage increase of around two percent on moving from a domestic to a foreign firm, augmented by higher wage growth among foreign-owned firms. However, these premia appear to be specific to foreign-firm employment, as workers who return to domestically-owned firms do not appear to retain the additional earnings associated with foreign-firm employment into their subsequent jobs. We then consider whether foreign-owned firms source workers differently from other New Zealand firms and whether there are systematic differences in the destinations of departing employees by firm ownership. Although foreign-owned firms do not appear to preferentially hire recent immigrants, employees of foreign owned firms are more geographically mobile within New Zealand than comparable workers in domestically owned firms, and are more likely to emigrate within a year of leaving their job.