15 December 2004

Treasury Releases December Working Papers

The Treasury today released three working papers in the December instalment of its Working Papers series.

This quarter’s papers are:

Carbon Taxation, Prices and Household Welfare in New Zealand (Paper 04/23).

Adult Literacy and Economic Growth (Paper 04/24).

Carbon Dioxide Emissions Reductions in New Zealand: A Minimum Disruption Approach (Paper 04/25).

Abstracts of the papers follow. The full papers can be found at:

www.treasury.govt.nz/workingpapers

04/23 Carbon Taxation, Prices and Household Welfare in New Zealand
John Creedy and Catherine Sleeman (The Treasury)

Abstract This paper examines the effects on consumer prices of a range of carbon taxes in New Zealand, using information about inter-industry transactions and the use of fossil fuels by industries. The resulting effects on the welfare of different household types and total expenditure levels are examined. The excess burdens of the carbon tax are computed for the different household types. Finally, overall measures of inequality are reported.

04/24 Literacy and Economic Growth
Grant Johnston (The Treasury)

Abstract Developed countries, including New Zealand, used to consider their populations wholly literate, in the sense that almost all adults could read and write. Contemporary definitions expand the concept of literacy to include wider cognitive skills, and extend it across the whole population: people are more or less literate depending on how well they understand and use printed information to solve everyday problems at home and at work.

Using this wider definition, the International Adult Literacy Survey found that developed countries contain a considerable number of people who have poor literacy skills. This paper looks at whether an increase in the basic literacy skills of adults would have a positive effect on the New Zealand economy. It finds good evidence for the benefits of literacy: studies consistently find that people with better literacy skills are more likely to be employed, and to earn more, than people with poorer literacy skills, even when taking account of other factors which affect work performance.

There is little rigorous evidence, however, for the benefits of literacy training and almost no accompanying information on the costs of this training. While there is a good case for an increased focus on adult literacy, these findings suggest a cautious approach to expanding publicly-funded adult literacy programmes and one which is accompanied by good-quality research and evaluation. 04/25 Minimum Disruption Reductions in Carbon Dioxide Emissions for New Zealand
John Creedy and Catherine Sleeman (The Treasury)

Abstract Reductions in carbon dioxide emissions can come from (among other things) changes to the structure of final demands, changes in the use of fossil fuels by industry, and changes to the structure of inter-industry transactions.

This paper examines the nature of the least disruptive changes, that is the minimum changes to these three components which are consistent with specified overall reductions in carbon dioxide in New Zealand. In examining the minimum changes needed, constraints are imposed on the corresponding changes in GDP growth and aggregate employment.

ENDS

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