Department of Economics Seminar Series

Upcoming Seminars

Brian Easton
Adjunct Professor, Auckland University of Technology

"The Five Great Stagnations"

Monday 21 May, 12m-1pm, MSB.4.02

Abstract:
While there is a tendency to assume that market economies experience long term growth, New Zealand has in fact experienced five great stagnations where for at least seven years there was no growth in per capita GDP, taking up over a third of the period since 1862 (when the data series begins). The paper identifies them, looks for commonalities and asks whether New Zealand is in its sixth great stagnation.

Profile:
The presenter, independent scholar Dr Brian Easton, is an adjunct professor at the AUT and has honorary positions in four other universities including with NIDEA at the University of Waikato. He is writing a history of New Zealand from an economic perspective as well as being deeply involved in the national economics debate (as may be evident from his 'Listener' columns). He is a Distinguished Fellow of the New Zealand Association of Economists. Dr Easton is also a former Director – New Zealand Institute of Economic Research (NZIER).

Further upcoming Department of Economics seminars for 2012 will be announced shortly.

Recent Seminars

Phil Journeaux
Agricultural consultant

"Farm Profitability & Other Stories"

Friday 4 May, 11am-12pm, MSB.4.02

Abstract:
This talk discusses a range of issues affecting the agricultural sector, from changes in farm profitability over the last decade, what's happening with land prices, levels of debt, on-farm cost inflation, and productivity improvements. The drivers behind these are discussed, as are ways forward.

Gazi Hassan
University of Waikato

"Health and Economic Growth: Cross-Country Evidence within a MRW Type Framework"

Friday 30 March, 12-1pm, MSB.4.02

Abstract:
It is widely believed by development economists that the role of human capital is one of the most fundamental determinants of economic growth. Sustained growth depends on the level of human capital whose stocks increase due to better education, higher levels of health, new learning and training procedure. The intuition that good health raises the level of human capital and has a positive effect on productivity and economic growth has been modelled by enodogenous growth theorists. But empirically ascertaining the causal relationship between health and growth is more difficult due to the possible existence of endogeneity between these two variables. Recently Acemoglu and Johnson (2007) shown that increases in population health, as measured by higher life expectancy, are negatively correlated with economic growth in cross-country panel data with the aid of newly constructed a country-varying instruments which are dependent on the exogenous shocks to national health generated by improvements in health technology using the pre-intervention distribution of mortality from 15 diseases. On the contrary, Lorenzen, McMillan and Wacziarg (2008) use seventeen instruments based on malaria ecology index, climate variables and geographic features and find that health as measured by mortality rates has a strong positive effect on economic growth. Aghion, Howitt and Murtin (2010) and Bloom, Canning and Fink (2009) have reconciled the findings in above two studies using a unified model that controls for initial level of life expectancy in the regression to allow for convergence in the form of human capital. All the above mentioned studies use some form of endogenous growth models that allow the effect of health to work through total factor productivity. In contrast this paper uses Mankiw, Romer and Weil (1992) type framework and model the role of health as a regular factor of production by adopting a particular type of production function used by Bloom, Canning, and Sevilla (2004) and Romer (2007) that fits the data in the microeconometric literature on return to human capital very well. Using this production function, this study firstly derives the steady state income equation which can be empirically tested and then shows that the level of health, as measured by life expectancy, has a positive effect on the level of income controlling for unobserved time and country effect and autocorrelation in the 5 and 10 year panels of 83 countries from 1960 - 2009. The paper uses school enrolment data as an instrument for controlling the endogenity of health using two stage least square (2SLS) estimator along with Arrelano-Bond GMM estimator. The paper also derives the growth equation from the model and shows that the level of health has a positive effect on growth of income in the same sample by allowing for convergence in income.

El-Hadj Bah and Geoff Cooper
University of Auckland

"Constraints to the Growth of Small Firms in Northern Myanmar"

Friday 23 March, 12-1pm, MSB.4.02

Abstract:
This paper uses survey data collected from a small urban city in North West Myanmar to characterise firms and analyse the constraints limiting their growth. The level of firm ownership is very high but most firms are small, informal, operated out the home, earning low income and with no employees.  The most biding constraints are related to financing constraints, especially lack of access to informal credit. This is followed by the high degree of competition as the majority of firms are small retailers selling non-differentiated goods.  This lack of credit and high aversion to be in debt limit the ability entrepreneurs to take advantage of the high returns on investment. We find that firms that made capital investment are significantly more profitable than those that did not.

Richard Yao
Scion

"The Non-Market Value of Biodiversity Enhancement in New Zealand's Planted Forests"

Friday 9 March, 11am-12pm, MSB.4.02

Abstract:
This study investigates the non-market value of biodiversity enhancement in New Zealand's planted forests using the stated choice experiment (CE) approach. This study focuses on two issues. One issue is policy orientated where we estimate the non-market value of biodiversity enhancement and the determinants of this value. The other issue is about the neutrality of major experimental design criteria used in CE. To estimate the non-market value of biodiversity enhancement, a random parameters logit model with error components is used to analyse choice data collected from 209 respondents. The panel nature of the choice data set is exploited to calculate the marginal willingness-to-pay (WTP) for environmental attributes of each respondent. Results suggest that New Zealand taxpayers would be willing to pay more than 30 million dollars per year for five years for a proposed biodiversity enhancement programme. Random effects regression analysis results suggest that respondents living close to large planted forests (i.e., less than 10 kilometres away) would pay more for the programme. To study whether the selection of experimental design criterion affects attribute non-attendance and choice variability, we analyse a balanced sample with split designs. Our data suggest that the Bayesian D-efficiency Design (BDD) criterion provides choice tasks that are superior compared to Orthogonal and Optimal Orthogonal Design criteria. In our case, the choice data collected using BDD has a higher quality as indicated by more attended choice tasks, lower choice variability and a pattern of continuous learning. These results point to a higher behavioural efficiency of respondents in evaluating complex choice tasks.

Valente Matlaba
Doctoral candidate, University of Waikato

Friday 24 February, 11am-12pm, MSB.4.02

Abstract:
In this paper, we analyse the hitherto unexplored effect of the creation of Brasilia city on Brazilian regional growth patterns from 1939 to 2008. We test two conflicting theoretical frameworks, the agglomeration forces theory versus regional development policy. We applied different techniques for the estimations of models. First, cross-section Seemingly Unrelated Regression (SUR) models to measure Brasilia's effect on the levels of income, income per capita and population for regions showed that Brasilia did not reverse the spatial economic patterns established before its creation. Rio de Janeiro had no effect for income and income per capita and had a negative effect for population of its neighbours. In contrast, São Paulo continued with its prominent role as the core of agglomeration of economic activities in Brazil. Secondly, Brasilia's effect was analysed through cross-section SUR models for growth of income per capita. The paper tests for beta convergence and finds a weak evidence of convergence of income per capita across cities. However, this process was modified by an increase in São Paulo's (positive) economic power on neighbouring regions while Brasilia either had zero effect or a crowding-out effect, impeding growth of its neighbour regions. Brazil's second largest city, Rio de Janeiro, had only a positive effect on growth of its neighbours in the 2000s, but not before. These results confirm some predictions of the convergence theory but the theory must be modified to incorporate agglomeration influences. Further analysis was performed to evaluate whether there was spatial autocorrelation in the estimates based on convergence theory. We found no evidence of spatial dependence once the agglomeration forces had been accounted for. These results are consistent with other studies that point to the growing influence of São Paulo's economic power. Overall, the findings confirm that the influence of agglomeration forces outweigh effects of regional development policy in explaining regional growth in Brazil, consistent with modern economic geography literature.

Stephane Hess
Institute for Transport Studies at the University of Leeds

Friday 25 November, 11am-12pm, MSB.4.02

Abstract:
The study of human behaviour and inparticular individual choices is of great interest across numerous fields. Substantial attention has been paid to the way in which preferences vary across individuals, and there is a realisation that such differences are at least inpart due to underlying attitudes and convictions. While this has been confirmed in empirical work, the methods typically employed are based on the arguably misguided use of responses to attitudinal questions as direct measures of underlying attitudes. This potentially leads to measurement error and endogeneity bias and is also not applicable when there is an interest inforecasting. This presentation gives an overview of recent work looking at a more appropriate treatment of attitudes. Specifically, these emerging methods recognise that attitudes themselves are unobserved, and that any answers to attitudinal questions are merely a function of these latent attitudes, which similarly influence the actual choices. This can be accommodated in a framework that jointly models responses to attitudinal questions and the observed or stated choices. The wide applicability of the method will be highlighted through examples from environmental economics and food choices.

Bio:
Dr Stephane Hess is Reader in Choice Modelling in the Institute for Transport Studies at the University of Leeds. He is the research group leader for the Transport Modelling group. He is also Honorary Professor in the Institute for Transport and Logistics Studies at theUniversity of Sydney, an external affiliate in the Centre for the Study ofChoice (CenSoC) at the University of Technology, Sydney, and a senior technical advisor for Resource Systems Group. He has formerly held posts as a research fellow in the Centre for Transport Studies at Imperial College London and as a senior researcher in the Institute for Traffic Planning and Transport Systems at the Swiss Federal Institute of Technology Zürich (ETH). He has also spent time as a visiting researcher in the Department of Civil Engineering at the Massachusetts Institute of Technology.

His main research interests lie in the use of advanced discrete choice models for the analysis of travel behaviour, primarily with the use of stated preference data.

He is also the founding editor in chief of the Journal of Choice Modelling and the organiser of the International Choice Modelling Conference. He serves on the editorial advisory board of two leading journals; Transportation Research Band of Transportation, is the chair of the Innovative Methods in Transport Analysis, Planning and Appraisal committee at the European Transport Conference and a member of two academic committees of the Transportation Research Board. He is a also a member of the council of the Association for European Transport.

Shamim Shakur
Massey University

Friday 18 November, 11am-12pm, MSB.1.02

Abstract:
Frustrated by the slow progress, and now a deadlock at WTO's Doha Round, many countries are actively pursuing bilateral free trade agreements (FTA) as "second-best" option to a multilateral free trade. By now, about five-hundred FTAs have been notified to the GATT/WTO, and the pace is getting momentum. Literature on the benefits of this type of partial trade liberalisation paints a very mixed bag picture for underlying participants. New Zealand (NZ) is at the forefront of this global race to sign bilateral trade agreements. Of NZ's eight FTA's currently in force, all but the Closer Economic Relations (CER) agreement was concluded in the last decade, while another five are currently under active negotiations.

This research examines two of NZ's FTAs: the ASEAN, Australia and NZ Free Trade Area (AANZFTA) agreement that entered into force in 2010, and the proposed NZ-India FTA. ASEAN and India are two of NZ's fastest growing trading partners. Since these FTAs are either in their infancy (ASEAN), or yet to take effect (India), the research employs pre-FTA data to make ex-ante assessment of their likely impacts. There is an extensive theoretical literature on customs union dating back to 1950s and more recent applied literature that focus on making ex-ante assessment of FTAs using pre-agreement data. Findings of this research are based on calculating some key indices as well as important economy-wide impacts of the FTAs- mainly from New Zealand's point of view.

Compared to AANZFTA, an FTA with India can be expected to bring much bigger benefits to NZ mainly because of India's previous isolation and current economic boom. But the final verdict remains an empirical question that is the objective of this research. Assessment of AANZFTA is now complete while that of the proposed NZ-India FTA is on-going. Preliminary estimates suggest NZ can expect modest gains irrespective of continued growth of the Indian economy. Effects on trade balance within NZ's main sectors are uneven with wool, forestry and raw minerals as likely big winners, but not for meat or dairy. Estimates on partner gains may pose some issues in future negotiations. Non-economic considerations need to be weighed against possible economic effects.

Lynda Sanderson
The Treasury, and PhD student, University of Waikato

Friday 4 November, 1:10-2pm, MSB.0.01

Abstract:
This seminar outlines recent findings from a programme of research on the determinants and consequences of international engagement by New Zealand firms. The research programme is designed to address two central questions: (1) How do characteristics of the firm and the economic environment influence the ability and incentives of New Zealand firms to become internationally engaged? (2) What effect does international engagement have on subsequent firm performance? These questions are addressed using longitudinal firm-level data from Statistics New Zealand's prototype Longitudinal Business Database. The seminar will deal specifically with causal relationships between export market entry and firm performance, and the pre- and post-acquisition performance of New Zealand companies which have been subject to foreign acquisition.

Graeme J. Doole*, Alvaro Romera**, and Alfredo Adler**
* University of Waikato and University of Western Australia, ** Dairy NZ

Friday 28 October, 1:10-2pm, MSB.0.01

Abstract:
New Zealand dairy farms are complex agricultural systems that produce this nation's key export commodity. There is considerable debate surrounding the relative value of alternative management options within these systems given their complexity. A constrained nonlinear optimisation framework, the Integrated Dairy Enterprise Analysis (IDEA) model, of a New Zealand dairy farm has been developed that allows such complex problems to be investigated. The IDEA model is notable for its rich description of pasture and cow biology that removes biases present in other optimisation models of grazing systems. The ability to optimise elements of the system is a key benefit, as profitable responses to external shocks often requires changes to multiple system components given their integration. Representative output and the extension of the IDEA model to incorporate greenhouse gas mitigation within New Zealand dairy farms will be discussed. Overall, the model provides an important example of the benefits of incorporating greater complexity in optimisation models of agricultural systems.

Riccardo Scarpa
University of Waikato

Friday 14 October, 1:10-2pm, MSB.0.01

Abstract:
Preferences for water quality and its nonmarket valuation, are of growing interest in a world where supply is increasingly problematic. Measures of preference and value can be used to inform the development of policy regarding pricing and longer term supply strategies. Tap water quality is a household concern. The objective status quo varies between households and not between individuals within households, while charges are levied on households not individuals. However, individual preferences differ from collective preferences. In households where there are two adults, we examine the preferences of each separately and then as a couple in collective decisions. We show the level and nature of influence each has in developing a picture of the collective process. Like others before us we use discrete choice experiments to measure preferences and model the heterogeneity across three experiments; the women, the men and joint. We propose a random utility model which decomposes the error structure in the utility of alternatives so as to identify the individual influence in collective decisions. This approach to choice data analysis is new to environmental economics.

Sarah Baird*, Craig McIntosh**, and Berk Ozler***
* George Washington University, ** University of California at San Diego, *** The World Bank

Friday 30 September, 1:10-2pm, MSB.0.01

Abstract:
This paper assesses the role of conditionality in cash transfer programs using a unique experiment targeted at adolescent girls in Malawi. The program featured two distinct interventions: unconditional transfers (UCT arm) and transfers conditional on school attendance (CCT arm). While there was a modest decline in the dropout rate in the UCT arm in comparison to the control group, it was only 43% as large as the impact in the CCT arm at the end of the two-year program. The CCT arm also outperformed the UCT arm in tests of English reading comprehension. However, teenage pregnancy and marriage rates were substantially lower in the UCT than the CCT arm, entirely due to the impact of UCT's on these outcomes among girls who dropped out of school.

Bio:
Sarah Baird is an Assistant Professor of Global Health at George Washington University. She is a development economist whose work focuses on analyzing health issues in developing countries through careful program design and evaluation, with a focus on the health of infants and youth, as well as on issues related to HIV/AIDS. She has conducted field work in Vietnam, Kenya, Malawi and Tanzania. She received her Ph.D in Agricultural and Resource Economics at UC Berkeley in 2007 and has also been a post-doctoral fellow in the School of International Relations and Pacific Studies at UC San Diego.

Anthony Leddin
University of Limerick and Visiting Fellow, University of Waikato

Friday 23 September, 1:10-2pm, MSB.0.01

Abstract:
This paper examines the Irish experience in European Monetary Union and extracts some lessons for small countries participating in a monetary union. The analysis indicates that leading economic indicators can be seriously misleading; economic appraisal by international institutions such as the IMF, OECD and EU can be well wide-of-the-mark and that when the shock comes, it can be sudden and painful and the remedies extremely prolonged and difficult. The paper looks at the response of the Irish government to the crisis and, in particular, the decision to issue a comprehensive bank guarantee. Policy failures at both domestic and EU level are also discussed. The paper concludesby examining if Irish debt is sustainable and the way out of the economic malaise.

Bio:
Dr Anthony Leddin, BA, MA, Ph.D has recently stepped down as Head, Department of Economics, University of Limerick, Ireland after a six year term. His main academic interest is inthe area of international monetary economics and macroeconomic policy. He has taught at other universities in Canada, Eastern Europe and South Africa. He is a recipient of UL's Teaching Excellence award and has acted as consultant to the World Bank, Washington. Published books and journal articles include: The Macroeconomy of Ireland (editions 1, 2 3 and 4), Gill and Macmillan and TheMacroeconomy of the Eurozone: An Irish Perspective, Gill and Macmillan, 2003 (with Brendan Walsh); Understanding Ireland's Economic Crisis: Prospects for Recovery, (with Stephen Kinsella), Blackhall Publishing, 2010. The journal article "Ireland in EMU: More Shocks,Less Insulation?" The Economic and Social Review, Vol. 37, No. 2, Summer/Autumn, 2006, was published with the current Governor of the Central Bank of Ireland, Prof Patrick Honohan.

Richard Yao, Riccardo Scarpa, John Rose and James Turner
Scion

Friday 9 September, 1:10-2pm, MSB.0.01

Abstract:
We evaluate three experimental designcriteria in the field, namely: orthogonality, Bayesian D-efficiency and optimal orthogonality, in terms of choice task complexity and task order effect. Tocompare the three criteria, we use heteroskedastic logit models to analyse survey data from a balanced split design used to value threatened native speciesin New Zealand's commercial forests. Results suggest that the Bayesian D-efficient design (BDD) is the superior design based on the finding that higher level of choice task complexity (via attribute dispersion proxies) contributes to increasing choice determinism of respondents unlike in the two other designs. In terms of task order effect, choice tasks derived from BDD exhibit steady learning effects that could favourably allow the increase in thenumber of choice tasks in the choice experiment exercise. The two other experimental designs did not exhibit any form of continuous learning. We conclude that using the BDD criterion provided more behaviourally efficient choice tasks.

Bio:
Richard Yao joined Scion (NZ Forest ResearchInstitute Ltd.) in July 2008. He works full time as a Scientist - Resource Economist at Scion in Rotorua and is also a part-time PhD student in Environmental Economics at The University of Waikato. His work for Scion is focused on the economic valuation of ecosystem services (e.g., biodiversity,recreation, avoided erosion) provided by NZ planted forests. He currently leads six research projects on valuing ecosystems services and sustainable resource management. He is also involved in the development of a five-year programme that aims to incorporate estimated ecosystem services values into a future forest value chain that underpins sustainable forest management. Richard hasworked on agroforestry and agricultural development in Southeast Asia before moving to New Zealand in 2006. Richard's PhD research is supervised by Professor Riccardo Scarpa. His thesis focuses on empirically investigating the behavioural efficiency of different experimental designs. In this seminar, he will present a summary of his key findings.

Seamus Hogan
Senior Lecturer, University of Canterbury

Friday 19 August, 11am-12pm, MSB.0.01

Abstract:
It is a defining characteristic of electricity supplied through AC networks that it cannot be efficiently stored, and needs to supplied at the instant that demand is registered. If retail prices in electricity markets do not fluctuate in response to fluctuations in demand and supply, then the burden of adjustment falls completely on the supply sides, necessitating a large investment in generation and transmission capacity to be able to handle peak loads. The capital cost of this rarely used peaking plant is then a large component of the true marginal cost of electricity.

It is something of a puzzle then that most retail electricity markets are characterised by fixed-price contracts. In this paper, we explore a possible explanation for this puzzle—that markets for historical reasons are caught in an inferior equilibrium of a coordination failure game. The idea is that there is a strategic complementarity in retail contracts in which the smaller the proportion of consumers opting for flexible-price contracts, the greater is the resulting volatility in spot-market prices, reducing the attractiveness of flexible-price contracts to risk-averse consumers.

Rupert Holborow
Head/Director of the Ministry of Foreign Affairs and Trade (MFAT) Economic Division

Thursday 11 August, 11am-12pm, MSB.1.02

Bio:
Mr. Rupert Holborow has been with the Ministry of Foreign Affairs and Trade for over 20 years. In that time he has worked both in New Zealand and overseas. He has held his current position as head of the Ministry's Economic Division for about 5 months following his return at the beginning of the year from 3 years in India as High Commissioner (Ambassador) with cross-accreditation responsibilities also for NZ's relationship with Sri Lanka, Bangladesh and Nepal.

Mr Holborow has spent much of his career on trade and economic issues - including a period spent working as Private Secretary to the Minister of Trade, before going to India, as NZ's Senior Official for APEC (a grouping of 21 economies in the Asia Pacific accounting for close to 60% of global GDP).

Arthur Grimes
Adjunct Professor, Department of Economics, University of Waikato,
Senior Fellow at MOTU Economic and Public Policy Research, and
Chair of the Board, Reserve Bank of New Zealand

The seminar will be based on MED Occasional Paper 11/02 jointly authored with Jason Le Valliant and Professor Philip McCann.

Bruce Elmslie
Professor of Economics, University of New Hampshire and
Visiting Professor of Economics, University of Waikato