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Treasury publishes six new Working Papers

The Treasury published six new Working Papers today, covering analysis of trade barriers, KiwiSaver data, sectoral-level capital investments, unemployment rates, superannuation and labour market dynamics.

Recent Unemployment Experience in New Zealand (WP 14-01) was written by Jeff Borland. The rate of unemployment in New Zealand increased by about 3.5 percentage points between late 2007 and late 2009, and then remained relatively steady to early 2013. This paper argues that changes to the rate of New Zealand unemployment can be explained entirely by economic growth outcomes, and do not seem to reflect any structural change in the labour market. This suggests that there are not any impediments to the rate of unemployment falling back to levels that existed in the mid-2000s.

To Save or Save Not: Intergenerational Neutrality and the Expansion of New Zealand Superannuation (WP 14-02) was written by Andrew Coleman. This paper analyses the consequences of expanding New Zealand Superannuation on a save-as-you-go basis through the New Zealand Superannuation Fund rather than on a pay-as-you-go basis. These funding mechanisms differ in terms of their effects on different cohorts, long run tax rates, capital accumulation, and risk. The paper argues that an automatic pay-as-you-go funded expansion of New Zealand Superannuation is unattractive on many grounds, even if pay-as-you-go funding remains for much of the programme. It concludes that in addition to reducing long run tax rates, the use of save-as-you-go funding through the New Zealand Superannuation Fund provides households with a means of reducing income risk over the course of their lives.

New Zealand Labour Market Dynamics: Pre- and Post-global Financial Crisis (WP 14-03) was written by Weshah Razzak. This paper analyses historically recent increases in the unemployment rate; examines whether these increases are cyclical versus structural; and estimates the speed of adjustment of the unemployment rate to its “natural rate” (NRU). It notes that major increases in unemployment occurred after the Asian financial crisis and the global financial crisis, with similar labour market dynamics.

An Empirical Study of Sectoral-Level Capital Investments in New Zealand (WP 14-04) was written by Weshah Razzak. This paper uses an empirical model to estimate the responsiveness of growth in sectoral-level investment. The main findings of this study are sectoral-level investment growth responds significantly and contemporaneously to sector-specific and country-specific productivity shocks, but only responds significantly to past global productivity shocks with a two-year lag. Sectoral-level investment growth responds positively to shocks in the terms of trade, although the reactions vary from one sector to another, and with different lags. Investment growth at the sectoral-level is also driven by past investment level reflecting adjustment costs, and expectations. The findings are consistent with the view that New Zealand’s capital investments shallowness is associated with relatively low productivity.

A Gravity Model of Barriers to Trade in New Zealand (WP 14-05) was written by Murat Genç and David Law. This paper provides a brief discussion of the state-of-the-art methods used to measure trade costs and to quantify their impact on international trade. It then investigates the role of a range of barriers to New Zealand’s trade, including tariffs and a number of non-trade policy factors such as property rights, financial market sophistication, corruption, and a range of measures related to infrastructure quality. The findings highlight the growing importance of non-policy induced barriers to trade.

KiwiSaver: Comparing Survey and Administrative Data (WP 14-06) was written by Anton Samoilenko and David Law. This paper examines the KiwiSaver information contained in administrative data from the Inland Revenue Department and the Survey of Family, Income and Employment. In particular, it explores the membership and contribution information, explaining significant patterns and highlighting any differences that exist between the two data sources. At the aggregate level, the paper shows noticeable difference in membership levels, tenure, annual employer and employee contributions and total cumulative contributions. At the individual level, regression results identify the main determinants of the observed differences and quantify their impact.

The views, opinions, findings, and conclusions or recommendations expressed in Treasury Working Papers are strictly those of the authors and do necessarily reflect the views of the Treasury.

ENDS

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