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Treasury Releases March Round Of Working Papers

1 April 2005

Immediate Release


The Treasury today released its March round of Working Papers. The Treasury also released the first two papers in its new Policy Perspectives series.

Policy Perspectives aims to bring ideas, analysis and empirical research to bear on topical policy issues. The papers seek to share important insights from economic literature, international policy experience and Treasury research in a manner that is accessible to non-specialist audiences.

The papers released today are:

- Population ageing and government health expenditures in New Zealand, 1951 - 2051 (Paper PP 05/01)

- Central government guidance and the Resource Management Act
(Paper 05/02)

- The Contributions from Firm Entry, Exit and Continuation to Labour Productivity Growth in New Zealand (Paper WP 05/01)

- Taxes vs permits: Options for price-based climate change regulation
(WP 05/02)

Summaries of the papers follow.

The full papers can be found at:

Policy Perspectives papers released today are:

1. Population Ageing and Government Health Expenditure

The average person aged 65 or over currently costs New Zealand’s public health system five times as much as the average person under 65. Over the next 50 years, the proportion of the population aged 65 and over is expected to double. Although this appears to imply that population ageing will put substantial pressure on government health care expenditures, international evidence suggests that changes in age structure may be a less decisive influence on health expenditure than is often assumed. To explore the implications of these issues for New Zealand, an inter-disciplinary team from the Treasury and the Ministry of Health has constructed a model of ageing, health and health expenditures. This paper uses results from the model to address a number of key questions concerning New Zealand’s health expenditure.

2. Central government guidance and the Resource Management Act

Central government plays a key role in the administration of New Zealand’s Resource Management Act 1991 (RMA). Although central government sets the legislative framework and can provide guidance such as policies, standards and information, there has been only one national policy statement, legislatively prescribed, on coastal policy. Until 2004 there were no national environmental standards. This raises the question of why further guidance has not been provided, and whether this can change without fundamental alterations to the regime. This paper outlines the options for change, including that which is effectively the approach of the Government’s current proposals: providing guidance with acknowledged limits, backed up with capacity building.

The two Working Papers released today are:

1. The Contributions from Firm Entry, Exit and Continuation to Labour Productivity Growth in New Zealand
This paper evaluates the contributions from firm entry, exit and continuation to labour productivity growth in New Zealand over the period 1995 to 2003. Results suggest significant diversity across both industries and firms. Most entering firms’ initial level of labour productivity is below the industry average but grows rapidly thereafter. Continuing firms generally add to industry labour productivity growth. On average exiting firms experience stagnant or declining labour productivity in the years leading up to their closure, and when they eventually fold most have below average labour productivity compared to their industry. This pattern persists even at a highly disaggregated industry level, and indicates that firm turnover has positively contributed to labour productivity growth in New Zealand.

2. Taxes vs Permits: Options for Price Based Climate Change Regulation

This paper provides an overview of key issues involved in the choice among market-based instruments for climate change policy. Specifically, it examines the potential net benefits from shifting to a permit system for emission reduction, and the preconditions necessary for this change. It also draws out the implications of New Zealand’s specific circumstances and current climate policies for future policy development.


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