Motu News January 2020

Jan 24, 2020

From the Executive Director of Motu Research
Kia ora koutou and happy 2020. 

Looking back, it has been nearly 11 months since I began my role as Executive Director. During my time at Motu, I've seen an impressive amount of policy relevant research released over a width breadth of topic. In fact, last year we released 23 working papers and 10 Motu notes. There were also around 20 articles in various international journals, including four by Niven Winchester, who also gained some international notoriety with his Rugby World Cup predictions. As an economist I can tell you that his prediction that the All Blacks would win is still valid, even while the sports fan in me is devastated.

The success of our researchers is epitomised by Catherine Leining's appointment to the Climate Change Commission. We already know the depth of Catherine's wisdom in this area and I'm extremely glad she will manage to fit in her CCC role while remaining a Motu Policy Fellow. Other excitements for me in 2019 were: Anne-Marie Brook's TEDx talk and the work she and the rest of the HRMI team are doing in the South Pacific; the initial funding for Motu's new freshwater management programme; and a thorough collection of papers centred around Dave Maré's work on diversity. This year, I am eager to share more high-quality public-good research with our stakeholders.

Like many others, I'm anticipating the rest of 2020. It has started with a fond farewell to our Communications Director, Ceridwyn Roberts who has been with us for five years (or 100 working papers). I am looking forward to working with Ruth Copeland who has joined us to make her own particular mark on our communications. Over the next month we will also be welcoming our new Research Analysts and seeing the results of our summer interns' work. After that we will begin recruiting junior research staff for 2021.

Please do contact me on if you would like to know more.
John McDermott
Executive Director

Catherine Leining announced as a Climate Change Commissioner

Catherine Leining landscape2Motu Economic and Public Policy Research is proud to announce the appointment of Catherine Leining as a New Zealand Climate Change Commissioner. Ms Leining is a Motu Policy Fellow and has over 26 years of international policy experience, specialising in climate change mitigation policy. She brings to her role as Commissioner a unique combination of technical policy expertise and commitment to working with climate change stakeholders across sectors. We are happy that Catherine will continue with her Motu work while performing this valuable role.

As a Policy Fellow at Motu Economic and Public Policy Research, Catherine will continue to lead Motu’s research and engagement programme on “Shaping New Zealand’s Low-Emission Future.” In this role she has conducted influential stakeholder dialogues and conferences. Ms Leining's key accomplishments include helping design the New Zealand Emissions Trading Scheme (NZ ETS), serving on the New Zealand delegation to the UNFCCC negotiations (2008-2009) and co-developing a ground-breaking proposal for NZ ETS reform.

NZ ETS Cap Explorer

The New Zealand Emissions Trading Scheme (NZ ETS) Cap Explorer tool was created to help individuals understand how NZ ETS design features and drivers of greenhouse gas (GHG) emissions could influence domestic emissions, emission price, and fiscal outcomes. This tool uses data derived from modelling of hypothetical scenarios which do not align with current government targets or policies. It is intended to be educational, and its outputs should not be interpreted as predictions or recommendations for future emission levels, emission prices, or fiscal impacts under the NZ ETS. It may, however, prove useful in submissions on proposed settings for the reform of the Emissions Trading Scheme (due 28 February 2020).

A Motu Note explaining the design of the tool, along with some key insights is also available.

Public Policy Seminar: Improving Estimates of the Social Cost of Carbon, and the Status of State and Federal Climate Policy in the United States

Rennert 2210 web2.originalSpeaker: Kevin Rennert, Fellow and Director, Social Cost of Carbon Initiative, Resources for the Future, United States
12.30-2pm, Thursday 13 February, Adam Auditorium, City Art Gallery, Civic Square, Wellington.

RFF’s Social Cost of Carbon Initiative is a multi-year, multidisciplinary research initiative that is advancing recommendations of the US National Academies of Sciences to update the methodology for estimating the social cost of carbon, enhance transparency, and ensure that the updated figures reflect the best available science. The initiative will provide an updated set of estimates of the social cost of carbon that are grounded in the most current science as well as facilitate a more flexible and regular process for updating the social cost of carbon going forward. These improvements will enhance the capabilities of decision makers and analysts worldwide who use the social cost of carbon estimates to measure the benefits of emissions reductions, now and in the future. In this talk I will discuss the research efforts being taken as part of the initiative, including the provision of scientific updates across each of the four core steps of estimating the social cost of carbon and their implementation in a new open source computing platform for Integrated Assessment Modeling. In addition to the social cost of carbon, I will also discuss the status of and context for ongoing policy efforts at the US federal and state levels to reduce greenhouse gas emissions in line with a net-zero US economy by 2050.

Bio: Kevin Rennert joined RFF as a visiting fellow in 2017. Prior to his arrival at RFF, Rennert served as deputy associate administrator for the Office of Policy at the US Environmental Protection Agency. Leading up to his appointment in the Office of Policy, he worked as senior advisor on Energy for the Senate Finance Committee. In that role, Rennert advised the committee’s Chairman, Senator Ron Wyden (D-OR), on a wide range of topics related to clean energy, efficiency, and policies to reduce greenhouse gas emissions. From 2008 to 2014, he worked on energy and climate legislation as senior professional staff for the Senate Energy Committee. In that capacity, Rennert led the development of the Clean Energy Standard Act of 2012 (S. 2146), a presidential priority that would use market mechanisms to double the amount of electricity generated in the US from low or zero carbon sources by 2035. In 2010 and 2011, Rennert also taught graduate courses in energy policy as adjunct faculty in the Department of Strategic Management and Public Policy at George Washington University.

Motu News

Kiwi female doctors earn 12 percent less than male doctors - Newshub

Engineered wood could cut building emissions and costs - MIT Joint Program on the Science and Policy of Climate Change

Government urged to boost internet use by the disadvantaged - Computerworld

Social Cost of Carbon: Six big questions (with a little help from New Zealand’s native wildlife) - Low-Emission Future Blog

Examples of occupations that have emerged or practically disappeared - New Zealand Productivity Commission

Expert reaction to the gender pay gap in NZ research - Science Media Centre

Massive early childhood education workforce needs priority focus and fair pay - NZEI

Congestion charges ‘more popular than you’d think’ - Newsroom

New Motu Publications

Motu Annual Report 2018-2019
The 2018-19 Annual Report is now available. The Motu Annual Report tells the story of Motu throughout the year, giving both financial information and an outline of the organisation's work. Annual Reports are available in hard copy by contacting or you can download an electronic copy here.

Article: Catherine Leining, Suzi Kerr & Bronwyn Bruce-Brand (2019) The New Zealand Emissions Trading Scheme: critical review and future outlook for three design innovations, Climate Policy.
The New Zealand Emissions Trading Scheme (NZ ETS) broke new ground in ETS design. Drawing from analysis of core policy documentation, this paper examines the rationale, outcomes, and outlook for three key innovations – broad sectoral coverage with some upstream points of obligation, the absence of a hard limit on system emissions, and a two-part cost containment mechanism – following the first decade of operation. It also provides comparative assessment with the European Union Emissions Trading System and California Cap-and-Trade Program. The NZ ETS was designed around the principle of least-cost compliance with international responsibility targets and a core assumption that the Kyoto Protocol emissions market would converge toward an efficient emission price aligned with rising global mitigation ambition. This assumption did not become a reality. As a result, the NZ ETS has produced a functional cross-sector trading market but little incentive for domestic mitigation to date. In late 2019, amendments were introduced to reform sectoral coverage, unit supply, and price management features so the system will better support New Zealand's targets under the 2015 Paris Agreement and 2019 Zero Carbon Act. However, substantial technical and political challenges remain to set near-term domestic mitigation ambition, phase out industrial free allocation, determine the mitigation contribution from the land sector, and design the agricultural emissions pricing regime. The evolution of the NZ ETS, relative to other systems and in response to national circumstances, offers insights that can inform the future development of emissions trading globally.

Article: Mare, David C and Jacques Poot. 2019. Commuting to Diversity. New Zealand Population Review, 45, 125–159
Does commuting increase workers’ exposure to difference and diversity? The uneven spatial distribution of different population subgroups within cities is well documented. Individual neighbourhoods are generally less diverse than cities as a whole. Auckland is New Zealand’s most diverse city, but the impacts of diversity are likely to be less if interactions between different groups are limited by spatial separation.Studies of spatial sociodemographic diversity generally measure the diversity of local areas based on who lives in them. In this study, we examine measures of exposure to local cultural diversity based on where people work as well as where they live. Our measure of cultural diversity is based on country of birth, with ethnicity breakdowns for the New Zealand (NZ) born. The study also examines whether the relationship between commuting and exposure to diversity differs between workers with different skills or types of job. The study focuses on diversity and commuting patterns within Auckland, using 2013 Census microdata, and using local diversity measures calculated for each census area unit. We find that commuters who self-identify as NZ-born Europeans and residents born in England (together accounting for close to half of all commuters) are, of all cultural groups, the least exposed to diversity in the neighbourhoods where they live. Overall, commuting to the workplace raises exposure to cultural diversity, and to the greatest extent for these two groups.

Article: Grimes, Arthur and Sean Hyland. (2019). "Measuring cross‐country material wellbeing and inequality using consumer durables." DOI: Scottish Journal of Political Economy, Vol 66, Issue 6. 
We measure the mean and inequality in country material wellbeing based on households’ consumer durables, using household‐level data from OECD’s PISA surveys for 40 countries over 2000–2012. Our consumption‐based measures capture aspects of material wellbeing not captured fully by income‐based measures. For 2012, tests show that the consumption‐based metrics are more closely associated with objective mortality‐related outcomes than are income‐based measures; in 2000 (and over 2000–2012) each set of measures adds information relative to the other. The consumption‐based measures may be particularly useful in revealing where income‐based measures provide inaccurate indications of the mean and/or inequality in household living standards.

Article: Winchester, Niven and John M Reilly. "The economic and emissions benefits of engineered wood products in a low-carbon future." Energy Economics Vol 85.​
There has been rapid growth in the use of engineered wood products in the construction sector in recent decades. We evaluate the economy-wide impacts on CO2 emissions from fossil energy use of replacing carbon-intensive construction inputs, such as steel and cement, with lumber products in the US under an emissions constraint. We find that the ability to substitute lumber-based building materials increases production from the lumber and forestry sectors and decreases production from carbon-intensive sectors such as cement. Under a carbon cap-and-trade policy, the ability to substitute lumber products lowers the carbon price and the GDP cost of meeting the carbon cap, with more overall emissions abatement in the construction industry. We briefly review the broader impact of forest harvest on carbon levels in forests, critical to determining the full life cycle impacts of greater lumber use, but do not add anything new to this literature.

Article: Fleming-Muñoz, David A., Kate Preston and Andrea Arratia-Solar. 2019. "Value and impact of publicly funded climate change agricultural mitigation research: Insights from New Zealand." Journal of Cleaner Production.
In this paper we discuss a framework to evaluate the benefits of publicly-funded research that includes scientific impact, impacts on stakeholders (next and end users of research outputs), and economic and environmental values. We apply this framework to evaluate two agricultural greenhouse gas (GHG) mitigation research science projects funded in New Zealand: research looking at mitigation options given by genetic markers for low methane animals, and the identification of emission-reducing management practices. From this analysis we achieve two main findings. First, the prominence of the research combined with the low likelihood of research occurring on this scale without public support suggests strongly that the results would not have been obtained in absence of public funding. Second, the advances reached in some areas have the potential for GHG emission reductions that would be significant in environmental terms, and whose value at likely carbon pricing levels would be in the hundreds of millions of dollars. The results discussed are conditional on several factors such as future domestic and international policy settings and implementation, adoption rates and the practical availability of mitigation options and practices for different farm landscapes. However, the impacts and economic and environmental values attached to these research projects, and mitigation research more generally, cannot be overlooked. The case studies evaluated clearly demonstrate the potential benefits that public investments can make to the development of more sustainable agricultural systems.

Viv B. Hall & C. John McDermott (2019). Changes in New Zealand's business insolvency rates after the GFC, New Zealand Economic Papers.
We examine the question of whether the rate of business insolvencies in New Zealand is related to overall macroeconomic conditions. In particular, our interest is in whether the rate of business insolvencies changed in the wake of the Global Financial Crisis (GFC). We find that there was a large increase in insolvencies in New Zealand following the onset of the GFC in 2008. We also find that the timing of the change did not occur uniformly over the country but occurred at different times in four key regional centres. Sharply rising relative costs were the most important macroeconomic factor influencing corporate insolvencies in New Zealand, Auckland, Waikato and Wellington, but have been immaterial in determining New Zealand's total personal insolvencies. It is employment growth and house price inflation that have been significant in explaining total personal insolvencies.

Book Chapter: Alimi, Omoniyi & Maré, David & Poot, Jacques. (2019). "Modelling Inter-urban Migration in an Open Population Setting: The Case of New Zealand." DOI: 10.1007/978-981-13-9231-3_11 In book: Population, Place, and Spatial Interaction, pp.201-223.​
We revisit the modelling of gross inter-urban migration flows in New Zealand. As in previous work, we identify a range of geographic, demographic, economic and climatic characteristics of urban areas, which are statistically significant determinants of migration. However, we argue that in a small but open population such as New Zealand (in which one quarter of the resident population is foreign born and one sixth of the New Zealand-born population lives abroad), inter-urban migration should be modelled jointly with rural-urban and international migration. We proceed to estimate a modified gravity model of migration in which the flow matrix is augmented with rural-urban and international migration. Migration data are obtained from four successive population censuses since 1996. We find notable differences in the impact of migration determinants when comparing urban-urban, urban-rural and urban-world migration flows. The estimation of these models is straightforward and does not require collection of data on rural areas or foreign countries. Hence, the method can be easily applied to other case studies in which international and/or rural-urban migration are important components of population churn.

Motu Working Paper 19-21: Sin, Isabelle and Bronwyn Bruce-Brand. 2019. "Is the pay of medical specialists in New Zealand gender biased?" Motu Working Paper 19-21, Motu Economic and Public Policy Research, Wellington, New Zealand.
We use individual-level data from the 2013 New Zealand Census combined with administrative income data from the tax system to estimate the gender gap in hourly pay for the population of medical specialists employed in the New Zealand public health system. Unionisation of these doctors is 90 percent, and their union’s MECA specifies their pay rates, which should limit the opportunities for a gender pay gap to arise. Nevertheless, we find that in their public health system employment female specialists earn an average of 12.5 percent less than their male counterparts of the same age, with the same specialty, and who work the same number of hours each week. This wage gap is larger for older ages, among those who work fewer hours each week, and for parents. Controlling for gender differences in experience at the same age decreases the estimated gender wage gap by no more than 20 percent. Our findings are consistent with male medical specialists being placed on higher salary steps than equally experienced female specialists, or males disproportionately receiving additional payments beyond the MECA minimum.

Motu Working Paper 19-22: David C Mare. 2019. "Occupational Drift in New Zealand: 1978-2018" Motu Working Paper 19-22, Motu Economic and Public Policy Research, Wellington, New Zealand.​
We measure the rate of occupational change in New Zealand between 1976 and 2018. We use measures of occupational drift reported by Atkinson and Wu (2017) for the United States and by the Australian Office of the Chief Economist (2018) for Australia. This supports the comparison of occupational change between countries as well as over time. We find that occupational change in New Zealand is broadly similar to that in the US or Australia, and that all three countries experienced a slowing in the rate of occupational change over recent decades. In New Zealand, occupational change was particularly strong between 1986 and 1991 and was historically low between 2006 and 2013, coinciding with the GFC. Current levels of occupational change are similar to those experienced between 1991 and 2006. Employment growth in professional occupations has been particularly strong, growing from 11% of employment in 1976 to 23% in 2018. There has also been pronounced growth and change in the mix of occupations within the 'community and personal services' occupation group and within 'clerical and administrative' occupations.

Motu Working Paper 19-23: Fabling Richard and Arthur Grimes. 2019. "Ultra-fast broadband, skill complementarities, gender and wages." Motu Working Paper 19-23, Motu Economic and Public Policy Research, Wellington, New Zealand.
We examine whether ultra-fast broadband (UFB) has selective complementarities with certain types of labour. Using longitudinal data on New Zealand firms’ internet connection type (UFB versus other forms of broadband) we find that, following UFB adoption by a firm, the wages of certain skilled incumbent employees rise. This is particularly so for males with STEM qualifications, plus males with university level qualifications (and possibly Masters level female graduates) without STEM qualifications. Wages of male employees without qualifications and of female employees with both lower level and no qualifications tend to fall relative to those in firms that do not adopt UFB. These results are consistent with the existence of skill-biased technical change. More puzzling is why these skill-biased changes have differential effects for incumbent male versus female workers.

Motu Note #41: Badenhorst, Shaan, Sophie Hale, Catherine Leining and Suzi Kerr. 2019. "The NZ ETS Cap Explorer Tool: design and key insights." Motu Note #41. Motu Economic and Public Policy Research. Wellington, New Zealand.​
The New Zealand Emissions Trading Scheme (NZ ETS) Cap Explorer tool was created to help individuals understand how NZ ETS design features and drivers of greenhouse gas (GHG) emissions could influence domestic emissions, emission price, and fiscal outcomes. In this Note, we discuss how the tool works, share some insights from using the tool, and detail the tool’s key assumptions and limitations.
This tool uses data derived from modelling of hypothetical scenarios which do not align with current government targets or policies. It is intended to be educational, and its outputs should not be interpreted as predictions or recommendations for future emission levels, emission prices, or fiscal impacts under the NZ ETS.

Remember, if you're interested in finding out about forthcoming papers from Motu, you can subscribe here.