When small towns experience a major infrastructure shock, such as a "mill' closure, the effects can be devastating.
We analyse the effects of two major freezing works closures in New Zealand, in Patea (1982) and Whakatu (1986). These two examples provide an interesting comparison: Whakatu is located close to a city, while Patea is relatively isolated. We describe the impacts of these shocks on population, employment and house values in each town, relative to two sets of comparators. These descriptions allow us to contrast long-run trends and adjustment dynamics resulting from the differing locations of both towns.
We find that both towns experience negative population and employment impacts; however, consistent with benefits of a near-city location, the effects on Whakatu are mainly temporary, whereas the effects on Patea are more permanent. Population age-groups respond very differently to the shocks, in ways that are consistent with homeownership being a factor stifling migration responsiveness in the face of a shock.
The results have implications for regional development policy choices with respect to infrastructure location and also for programmes designed to stimulate homeownership.