Objective 2: Understanding Geographic Adjustment
Objective 2 sought to understand the implications of location for community, family and individual well-being in New Zealand. The overall objective of the research is to summarise and understand the pattern of adjustment that occurs in response to exogenous economic and social change (“shocks”) and the way that these adjustments promote improved well-being.
The research programme explored why some communities respond positively to change while others do not. At least partly in response to the unevenness of changes across different geographic communities, there has been a heightened policy interest in place-based policies. Our research is designed not simply to understand the root causes of different responses to shocks but also to shed light on policy responses that could enhance positive responses and ameliorate negative effects. By exploring the relationships between ‘people’ and ‘places’, we are able to assess the effects of policies aimed at individuals on their communities, and of policies aimed at ‘places’ on individual responses and hence the effectiveness of those policies.
The relationship between shocks, attributes, outcomes and adjustments is complex. In order to make our investigation tractable, we initially abstract from many of the complexities. Figure 1 shows a simplified version of relationships that serves as an organising framework for our research.
Figure 1: Organising framework
Our focus throughout is on the experiences of groups of individuals, families and communities (Box 1). Exogenous changes (Box 2) affect people, although the impact of the changes will depend in part on the initial characteristics of the people affected (Box 3). Adjustment to the shock will take a number of forms, some of which will be a result of responses by the affected community (Box 4). Patterns of observed changes in outcomes will reflect the impact of the shock, as well as the nature of adjustment processes (e.g.: what adjusts most, at what speed, and who is affected). It may also vary according to people’s starting points. Understanding this process will help us in anticipating the impacts of future changes – their nature, size, and distribution. It will also help individuals, communities, and policy-makers prepare for and respond more appropriately to change.
Internal mobility response to shocks
Sin, Isabelle and Steven Stillman. 2005. ‘The Geographical Mobility of Maori in New Zealand,’ Motu Working Paper 05-05.
This paper describes the geographical location and internal mobility of the Māori ethnic group in New Zealand between 1991 and 2001. We compare the mobility of Māori in particular locations to the mobility of similar Europeans in those same locations and find that, contrary to this anecdotal evidence, most Māori are, on average, more mobile than Europeans in New Zealand.
Maré, David C. and Jason Timmins. 2004. ‘Internal Migration and Regional Labour Markets In New Zealand,’ Paper presented to the NZAE Conference, Wellington, June 29-July 1 2004.
Timmins, Jason and David C. Maré. 2003. ‘Moving to Jobs?’ Regional Employment Growth and Internal Migration 1986-2000,’ Public Sector 26:2, pp. 16-18.
Timmins, Jason and David C. Maré. 2003. ‘Moving to Jobs?’ Motu Working Paper 03-07.
This paper uses data from the 1991, 1996 and 2001 censuses to examine the reationship between regional employment growth and the supply of workers through inter-regional inflows within New Zealand. We found evidence to suggest that people choose destinations where employment growth is stronger and that mobility is more labour-market related during periods of growth.
Housing market response to shocks
Grimes, Arthur and Andrew Aitken. 2004. ‘What’s the Beef with House Prices: Economic Shocks and Local Housing Markets,’ Motu Working Paper 04-08
We examine the impact of shocks on community outcomes. We use a multivariate panel structure to estimate the long-run and short-run impacts of price, production and demographic variables on real house prices.
Grimes, Arthur and Andrew Aitken. 2006. ‘Housing Supply and Price Adjustment,’ Motu Working Paper 06-01.
We analyse two inter-related features of regional housing markets: determinants of new housing supply, and the impact of supply responsiveness on price dynamics. We demonstrate that a suitably specified q-theory model (including residential land values as well as construction costs) explains intended housing starts.
Grimes, Arthur and Andrew Aitken. 2007. ‘House Prices and Rents: Socio-Economic Impacts and Prospects,’ Motu Working Paper 07-01
We use New Zealand property data at the area unit (suburb) level to examine implied prospects for communities over time, and test whether these derived prospects have explanatory power relating to actual future outcomes. We also analyse whether disadvantaged communities face particular problems in relation to rental markets. Our results indicate that: capital gains and rental growth expectations appear reasonable in that they are not suggestive of asset bubbles or other fad behaviour; derived capital gains and rental growth expectations have explanatory power both over actual future capital gains and over actual future rental growth; and lower socio-economic areas face higher rental yields, even after controlling for non-socio-economic factors, than do high socio-economic areas.
Grimes, Arthur, Suzi Kerr and Andrew Aitken. 2003. ‘House Prices and Regional Adjustment,’ New Zealand Geographical Society 22nd Conference Proceedings, pp. 238-241
House prices in New Zealand have increased fastest in regions with the strongest economic growth. The result has been a growing disparity in housing wealth. This disparity has implications for those wishing to migrate from relatively depressed regions to more dynamic regions, for example in search of employment.
Grimes, Arthur, Suzi Kerr and Andrew Aitken. 2003. ‘Housing and Economic Adjustment,’ Motu Working Paper 03-09. Earlier version available as “Housing and Structural Adjustment”, Centre for Housing Research Aotearoa New Zealand
We examine the dynamic and long run responses of house values across spatial communities and across time to economic variables that impact on the local economy. We use a specially constructed QVNZ-sourced database for house prices and house sales, and a range of explanatory variables constructed consistently across TLA and regional council levels.
Grimes, Arthur, Suzi Kerr and Andrew Aitken. 2004. ‘House Price Efficiency: Expectations, Sales, Symmetry,’ Motu Working Paper 04-02
We test the efficiency of the housing market by estimating the factors that determine both the long-run and the dynamic paths of regional house prices. Our tests use a new quarterly regional panel data set covering the 14 regions of New Zealand from 1981 to 2002. The tests indicate that regional housing markets converge to an equilibrium consistent with consumer optimising conditions, and hence with long-run efficiency. However, some conditions required for short-run (dynamic) efficiency are violated.
Grimes, Arthur, Suzi Kerr and Andrew Aitken. 2004. ‘Bi-Directional Impacts of Economic, Social and Environmental Changes and the New Zealand Housing Market,’ Motu Working Paper 04-09.
The aim of this study is to identify a set of housing research projects addressing two related topics. First, the impact of economic, social and environmental changes on housing in New Zealand’s non-metropolitan regions; and second, the economic, social and environmental impacts of the New Zealand housing market
Grimes, Arthur, Suzi Kerr, Andrew Aitken and Robert Sourell. 2006. ‘The housing fulcrum: balancing economic and social factors in housing research and policy,’ Kōtuitui: New Zealand Journal of Social Sciences Online 1, pp. 65-79.
We discuss the pivotal role that housing plays for both social and economic outcomes. We outline an analytical framework that treats housing as a dynamic system, incorporating the life-cycles of both individuals/ households and houses. We illustrate the issues with reference to the relationship between rental yields and measures of deprivation across New Zealand.
Grimes, Arthur, Robert Sourell and Andrew Aitken. 2005. ‘Regional Variation in Rental Costs for Larger Households,’ Motu Working Paper 05-02.
The cost of extra housing space (e.g. the cost of an extra bedroom) may vary across different locations, both absolutely (dollars per week) and proportionately (percentage of overall costs). Our analysis uses tenancy bond rental data to analyse the cost of renting an extra bedroom in different locations throughout New Zealand. We then examine the nature of regional rental costs, testing whether the documented patterns fit with theoretical predictions. Finally, we reflect on what the results may imply for social outcomes and housing policy in New Zealand.
Local economic adjustment
Velamuri, Malathi; Steven Stillman and Andrew Aitken. 2008. “The Long-Run Impact of New Zealand’s Structural Reform on Local Communities,” Motu Working Paper 08-11.
Grimes, Arthur and Richard Fabling. 2003. ‘Insolvency & Economic Development: Regional Variation and Adjustment,’ Motu Working Paper 03-18.
Grimes, Arthur and Richard Fabling. 2005. “Insolvency and Economic Development: Regional Variation and Adjustment”, Journal of Economics and Business, 57:4, 339-359
This paper examines the determinants of the rate of forced insolvency in New Zealand. The study incorporates two key features. First, we use regional as well as national data to explain insolvencies. Second, we explain the total rate of forced insolvency in New Zealand, including both personal bankruptcies and involuntary company liquidations. We show that interactions between economic activity, leverage and property price shocks provide a rich understanding of how region-specific shocks can compound into significant localised economic cycles.
Grimes, Arthur, Suzi Kerr and Andrew Aitken. 2004. “Land Taxes & Revenue Needs as Communities Grow & Decline: Evidence from New Zealand”, Lincoln Institute of Land Policy Working Paper WP04SK1, Cambridge, MA, and Motu Working Paper 04-01
New Zealand is unusual in that nearly 60% of local services are funded from property taxes. These are a mixture of land taxes, capital value taxes, annual rental value taxes and uniform general charges. We explore the efficiency and equity of this system at both national and local levels. We find that the national property tax base is large relative to spending needs but that the variance in per capita tax bases across territorial local authorities is probably greater than is efficient or equitable. We find that land taxes are more progressive than capital value taxes.
Hall, Viv and C. John McDermott. 2004. ‘Regional Business Cycles in New Zealand: Do They Exist? What Might Drive Them?’ Motu Working Paper 04-10
We use National Bank of New Zealand Regional Economic Activity data, to identify and characterise classical business cycle turning points, for New Zealand’s 14 regions and aggregate New Zealand activity. Using Concordance statistic measures, logistic model and GMM estimation methods, meaningful regional business cycles have been identified and a number of significant associations established. All regions exhibit cyclical asymmetry for both durations and amplitudes, and synchronisations between aggregate NZ activity and each region are contemporaneous. The regional cycles rarely die of old age but are terminated by particular events.
Lewis, Geoff and Steven Stillman. 2007. “Regional Economic Performance in New Zealand: How Does Auckland Compare?” New Zealand Economic Papers 41 (May). no. 1: 29-68.
Lewis, Geoff and Steven Stillman. 2005. “Regional Economic Performance in New Zealand: How Does Auckland Compare?” New Zealand Treasury Working Paper 05/08
In this study we investigate Auckland’s economic performance relative to other large cities in New Zealand, to medium-sized urban centres and to small towns and rural areas. We use data from the annual New Zealand Income Survey to examine hourly earnings and other measures of labour productivity and utilisation for a number of regional areas. Our results tell a fairly consistent story. Auckland and Wellington have the highest levels of productivity performance based on almost all measures of earnings.
Maré, David C, Arthur Grimes and Melanie Morten. (forthcoming, 2009) “Adjustment in local labour and housing markets” Australasian Journal of Regional Studies
Grimes, Arthur; David C Maré and Melanie Morten. 2007. “Adjustment in Local Labour and Housing Markets,” Motu Working Paper 07-10.
Maré, David C. and Jason Timmins. 2004. ‘Local Job Flows in New Zealand,’ in Blumenfeld, S & Morrison, P. (eds) Labour Employment and Work in New Zealand: 2004, Victoria University of Wellington, 2004
McLuskey, William; Arthur Grimes, Andrew Aitken, Suzi Kerr and Jason Timmins. 2006. ‘Rating Systems in New Zealand: An Empirical Investigation into Local Choice,’ Journal of Real Estate Literature, forthcoming
McLuskey, William, Arthur Grimes and Jason Timmins. 2002. “Property Taxation in New Zealand” Lincoln Institute of Land Policy Working Paper WP02WM1
Since European colonisation of New Zealand in 1840, property taxes have formed the foundation of local authorities’ revenues. We outline historical developments in systems of property taxation in New Zealand including influences which led to changes in the systems over time. We then examine in more detail the modern funding systems stipulated for local government, together with the “toolkit” of funding options available to local authorities. Our paper concludes with an empirical examination of local authority revenue and expenditure patterns. Within this work, we uncover a pattern which relates choice of rating system to the level of mean income within local authorities.
Does local composition matter?
Maré, David C. 2004. ‘Geographic Concentration of New Zealand Employment,’ in Blumenfeld, S & Morrison, P. (eds) Labour Employment and Work in New Zealand: 2004, Victoria University of Wellington, 2004.
This paper examines the degree of geographic concentration of employment in New Zealand, using summary measures proposed by Ellison and Glaeser (1997) and Maurel and Sedillot (1999). We use Statistics New Zealand Business Demography data for the period 1987-2003, and find that concentration has risen during that period. Where concentration does occur, it operates most strongly over distances of less than 50km.
Maré, David C. 2005. ‘Concentration, Specialisation and Agglomeration of firms in New Zealand,’ Motu Working Paper 05-12.
To what extent do New Zealand firms choose to locate close to each other, and why? This paper summarises patterns of geographic concentration of firms in New Zealand between 1987 and 2003. We present a range of summary measures of own-industry concentration, and examine between-industry colocation.
Maré, David C. and Jason Timmins. 2006. ‘Geographic Concentration and Productivity,’ Motu Working Paper 06-08.
Timmins, Jason. 2005. ‘Is infrastructure productive? Evaluating the effects of specific infrastructure projects on firm productivity within New Zealand,’ Motu Working Paper 05-14.
The paper investigates the feasibility of using a variant of the spatial equilibrium model to estimate the productivity effects of a specific infrastructure project in New Zealand. Policy makers are interested in the marginal effects of infrastructure investment on productivity and an evaluation of such effects would provide a useful check on the appropriateness and adequacy of current decision rules and institutions.