Motu News - November 2019

Motu News

Economist Niven Winchester predicts teams' chances of winning Rugby World Cup: Japan Times

Interactive: Do Kiwis choose to live in racially diverse neighbourhoods? Researchers find a surprising answer: NZ Herald

How to have quality freshwater and plenty of it: Newsroom

Iwi research lifts lid on carbon: Farmers Weekly

How emissions trading schemes work and they can help us shift to a zero carbon future: The Conversation

McDermott receives top economics honour

New Motu Publications

Motu Research Update 2019 Every year, Motu puts out an annual research update, with more in depth articles about recent research. In 2019, this newsletter includes articles on valuing diversity, the Waro Project, quality of life and business for migrants, solutions for freshwater management, and a human rights quiz.

Article. Government failure and success: A trans-Tasman comparison of two insulation subsidy schemes by Nicholas Preval, Jenny Ombler, Arthur Grimes, Michael Keall and Philippa Howden-Chapman, Agenda. 2019.
In the wake of the 2008 Global Financial Crisis (GFC), the governments of Australia and New Zealand undertook a variety of economic stimulus measures, including home insulation and heating retrofit programs. Australia’s Home Insulation Program (HIP) ended early and in disarray (Hawke, 2010; Kortt and Dollery, 2012) while New Zealand’s Warm Up New Zealand: Heat Smart (WUNZ:HS) program was considered a success, outperforming agreed targets and time frames and producing a variety of health and other benefits (Grimes et al., 2011, 2016; O’Sullivan, Barnard, Viggers and Howden-Chapman, 2016; Preval, Keall, TelfarBarnard, Grimes and Howard-Chapman, 2017). The paper first provides background to the two schemes, including the program structures and details about product choices and installation methods. These sections set out the proximate causes of failure versus success of the two schemes. We then analyse the underlying causes of the differing results across countries by analysing the processes of policy advice and consultation, and of implementation and evaluation of the schemes. Some concluding comments highlight our key findings.

Book Chapter. “Relative Income, Subjective Wellbeing and the Easterlin Paradox: Intra- and Inter-national Comparisons by Arthur Grimes and Marc Reinhardt. 2019. in: Rojas M. (ed.) The Economics of Happiness: How the Easterlin Paradox Transformed our Understanding of Well-Being and Progress. Switzerland: Springer, 85-106.
This book presents a panoramic view of the implications from Richard Easterlin’s groundbreaking work on happiness and economics. Contributions in the book show the relevance of the Easterlin Paradox to main areas, such as the relationship between income and happiness, the relationship between economic growth and well-being, conceptions of progress and development, design and evaluation of policies for well-being, and the use of happiness research to address welfare economics issues.

Motu Working Paper 19-05. Valuing cultural diversity of cities by Dave Maré & Jacques Poot
This paper revisits whether cultural diversity is a source of local production and/or consumption amenities. We adapt the analytical framework of Roback (1982, 1988) and Chen & Rosenthal (2008) to estimate the impact of cultural diversity on city wage and rent premiums from hedonic regressions.  We focus on New Zealand which – with high residential mobility and ease of setting up business – is particularly suited to this framework. Additionally, our estimates are based on a very large data set: complete unit record census data on individuals and dwellings in 110 urban areas spanning 32 years.  Controlling for observed and unobserved city characteristics, and for the potential endogeneity of diversity, we find that cultural diversity serves as a local positive production amenity and a weakly negative consumption amenity. The results are mostly robust to measuring cultural diversity by birthplace, ethnicity or religion; and to using a range of measures of diversity. We conclude that the presence of people from different cultural backgrounds enhances the profitability of urban firms.  In contrast, a city’s population has a weak preference for living near others who are culturally similar to them. The effects are stronger in larger cities.

Motu Working Paper 19-17. Digital inclusion and wellbeing in New Zealand by Arthur Grimes and Dominic White
We examine: (i) which groups have a lower likelihood of being digitally included in New Zealand, and (ii) how digital inclusion relates to wellbeing. Using four large-scale surveys, we identify several groups whose members are prone to relatively low internet access: people living in social housing; disabled individuals; Pasifika; Māori; people living in larger country towns (10,000-25,000 people); older members of society (particularly those aged over 75 years); unemployed people and those not actively seeking work. Those in social housing and disabled people are particularly disadvantaged with respect to internet access. Disabled people are also at greater risk than others from a virus infection or other internet interference. We identify a number of associative (but not necessarily causal) relationships between internet access and wellbeing. Those with internet access tend to have higher wellbeing and richer social capital outcomes (e.g. voting) than those without access. For adolescents, as internet use on weekdays outside of school increases, students’ subjective wellbeing declines; once daily internet use exceeds about two hours, we find no positive association between internet use and adolescents’ wellbeing. These results are of particular interest given that 15% of 15-year olds (including 27% of Māori students) report using the internet for more than 6 hours per day on a weekday outside of school, while over half report more than two hours’ use.

Motu Working Paper 19-18 Measuring the 'gig' economy: Challenges and options by Lynn Riggs, Isabelle Sin and Dean Hyslop
The increase in internet-based services has raised policy interest in gig work, which is work done outside formal employer-employee relationships. Given the dearth of information about the nature and magnitude of gig work and the extent of its growth in New Zealand, it is unclear whether current regulatory institutions adequately regulate it. There is also concern among policymakers about the effect of gig work on the financial stability of gig workers. In this paper we provide a New Zealand-specific typology for identifying gig work, and discuss conceptual and practical issues related to measuring it. We describe how existing New Zealand data can be used to learn more about gig work and make suggestions for improving its measurement in the future.

Motu Working Paper 19-19 EQC and extreme weather events (part 2): Measuring the impact of insurance on New Zealand landslip, storm and flood recovery using nightlights by Sally Owen, Ilan Noy, Jacob Pastor-Paz and David Fleming
Climate change is predicted to make extreme weather events worse and more frequent in many places around the world. In New Zealand, the Earthquake Commission (EQC) was created to provide insurance for earthquakes. In some circumstances, however, homeowners affected by extreme weather events can also make claims to the EQC – for landslip, storm or flood events. In this paper, we explore the impact of this public natural hazard insurance on community recovery from weather-related events. We do this by using a proxy for short-term economic recovery: satellite imagery of average monthly night-time radiance. Linking these night-time light data to precipitation data records, we compare houses which experienced damage from extreme rainfall episodes to those that suffered no damage even though they experienced extreme rainfall. Using data from three recent intense storms, we find that households which experienced damage, and were paid in a timely manner by EQC, did not fare any worse than households that suffered no damage from these extreme events. This finding suggests that EQC insurance is serving its stated purpose by protecting households from the adverse impact of extreme weather events.

Motu Working Paper 19-20 Commuting to diversity by David C Maré and Jacques Poot
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.

Motu Note #38. Māori land owners' decision-making processes around native forest regeneration by Pia Pohatu, Sophie Hale and Leo Mercer
Establishing native forests through new plantings or regeneration resonates well with Māori land owners as they seek to balance multi-dimensional considerations and give effect to their role as kaitieki. The New Zealand Emissions Trading Scheme (NZ ETS), land use diversification strategies and responding to perceived climate change risk are complex systems to understand and operate within. Being carbon farmers or earning an income from carbon farming is not yet a key driver in Māori land use diversification decisions. Nonetheless, when considered alongside wider aspirations for native forest land cover and co-benefits (such as improved water quality, restoring rongoā and other customary resources, protecting biodiversity and strengthening climate resilience), navigating the challenges and opportunities of being in the NZ ETS should be investigated and supported. This report is a study of Māori land owners’ decision-making processes and their cost (in time and other resources) when considering whether to enter the NZ ETS using native forests (both newly planted and natural regeneration). This aspect of emissions trading will be examined whilst considering the importance of Māori cultural values such as kaitiakitanga (including supporting livelihoods and returning benefits to land owners) and the barriers that Māori generally face when planning land use investments (such as concerns about retention of land ownership, and financial and legislative constraints).

Motu Note #39. Characteristics of Early Childhood Education workers and their employment by Dean Hyslop and Trinh Le
This research note summarises results of exploratory research into the ability of Statistics New Zealand’s IDI to support analysis of the early childhood education (ECE) workforce. We have focused on three issues: the characteristics of the ECE workforce; the annual transition and retention rates of workers in the ECE sector; and the industry sources and destinations of ECE workers who move into and out-of the ECE sector. The IDI data provides reliable employment and earnings data for wage and salary workers, subject to some caveats: first, there is no direct measure of hours or part-time versus full-time employment, making it difficult to reliably gauge the level of employment intensity worked within a month, or measure hourly earnings or (full-time equivalent) salary rates; second, measures of qualifications and immigration status used in the analysis are less reliable for older cohorts of workers. Over the period 2001 to 2017 the total number of workers in ECE in a year almost doubled, from 29,200 to 57,700. Women make up the overwhelming majority (94%) of the ECE workforce; and the share of workers of Asian ethnicity rose dramatically over the period. The share of degree- and ECE-qualified workers increased dramatically, reflecting both the increase in qualifications captured in the MOE data, and the increasing requirements for qualifications in the ECE workforce. ECE employment has also become more intensive over time, as evidenced from the increase in average number of months worked in ECE. Average total earnings of all ECE workers increased by 54% over the period 2001-2017, while average ECE earnings increased by 75% and median ECE earnings almost tripled. Annual retention rates within the ECE sector improved over the study period, particularly in Preschool education. Transition rates are higher for Males, younger workers, those with lower qualifications (level 1-3), or no ECE qualifications, and those with lower shares of total earnings from ECE.

Motu Note #40. Climate change adaptation within New Zealand’s transport system by Anthony Byett, Ben Davies and others
New Zealand’s transport system is inter-dependent. It comprises a network for which demand is derived from local communities and the wider economy. People use this network for economic and social purposes, such as commuting, shifting freight, and visiting friends and family. Transport also provides critical links during emergencies. Climate change affects the transport network itself. It causes damage, accidents and network disruption (Koetse & Rietveld, 2009). These have wider effects on communities and the economy. Climate change also alters the spatial allocation of activities and consequently leads to changes in derived demand for transport infrastructure. Climate change is important to consider in transport planning because transport assets are long-lived, and because the transport system is inter-twined with the wider economic and social systems. There are opportunities for adaptation in the normal cycle of infrastructure build and renewal. However, there are also many challenges due to the costs involved, the uncertainties1 ahead and the need to coordinate the different institutions that make up the transport system. This note discusses climate change impacts and adaptation within New Zealand’s transport sector. First, we describe the physical and institutional structure of New Zealand’s transport system.2 Second, we review the science behind, and impacts of, climate change related events that disrupt the transport network. Third, we discuss issues around climate change adaptation and the many questions that are still to be addressed. Finally, we conclude by identifying opportunities for further research.

Research paper. Is the global situation of human rights improving or deteriorating? Making the case for the empirical measurement of human rights change by HRMI and Universal Rights Group
Commentary on the worldwide human rights situation is often characterised by assertions of an unfolding human rights crisis in much of the developing world, and back-sliding in some of the world’s major democracies. Clearly human rights violations are far too commonplace in all parts of the world, and we have a long way to go to realise the vision set out more than seventy years ago by the architects of the Universal Declaration of Human Rights. But is it correct, as some would have us believe, that the global situation of human rights is worse today than it was five, ten or even fifty years ago? The short answer is: without better empirical measures of human rights performance, we do not know and, indeed, we cannot know. Measuring human rights performance is not straightforward. Yet it is as important as it is challenging. In the context of the global human rights ‘implementation gap’ that has caught the attention of United Nations (UN) member States, and human rights organisations, professionals and advocates, this policy brief sets out the relevance of adequate human rights measurement, and considers some of the key steps that have been taken in this area over recent decades. It then introduces a new (in operation since 2015) collaborative project that aims to put in place a first truly global and comprehensive (in terms of human rights coverage) system of human rights measurement: the Human Rights Measurement Initiative (HRMI).

Research paper. New jobs, old jobs: the evolution of work in New Zealand’s cities and towns by Andrew Coleman, Dave Maré and Guanyu Zheng
This paper for the Productivity Commission of New Zealand uses census data to document and analyse the changing nature of jobs in regional New Zealand between 1976 and 2013. While the material is largely descriptive, its aim is to unravel the effects of several different forces on the evolution of jobs, towns and cities. This paper is not designed to make predictions about either the future of work or the future of regions. Rather, by documenting the evolution of regional employment patterns in New Zealand over the last 40 years, it aims to help understand how New Zealand has got to its current situation.

Research paper. The impacts of job displacement on workers by education level by Dean Hyslop
This research note extends previous research by Hyslop and Townsend (2017; 2019) on the longer term impacts of job displacement on workers labour market outcomes, to examine the impacts for workers with different levels of education. It uses data from the Survey of Family, Income and Employment (SoFIE) to identify job displacements over the period 2001–10, matched to administrative data from Statistics New Zealand’s Integrated Data Infrastructure (IDI) covering the period 1999–2015, to facilitate at least five years of post-displacement observations. The results suggest that displaced workers with degree-level education experience larger adverse short-term employment effects, smaller medium to longer term employment effects, but larger and enduring earnings losses, than other displaced workers. The patterns are consistent with various hypotheses, including that, after a period of unsuccessful job search, degree-level educated workers may accept either lower skilled jobs or jobs with worse skill match. Alternatively, they may experience greater loss of either firm or industry-specific human capital, or lose substantial earnings premiums when displaced, that are difficult to replace.

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