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Modelling Regional Labour Market Adjustment in New Zealand

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  • Wai Kin Choy
  • David C Mare
  • Peter Mawson

    ()
    (Reserve Bank of New Zealand (Wai Kin Choy)
    Motu Economic and Public Policy Research Trust (Mare)
    The Treasury (Mawson))

Abstract

This paper adopts a vector autoregressive (VAR) approach to analyse the labour market adjustment mechanisms for 12 New Zealand regions over the period 1985 to 2001. It examines the effects of a region-specific shock to employment on itself, the unemployment rate, the participation rate, and the wage rate. The role of migration as a channel of regional labour market adjustment is also inferred. We find that adjustment occurs predominantly through inter-regional migration although the unemployment and participation rates also play a role. Wages, on the other hand, account for very little adjustment. The importance of inter-regional migration in New Zealand matches the results found in Sweden, but stands in contrast to the picture in many European countries. Migration appears to be a more dominant adjustment channel compared to the US and Australian cases. However, this has to be placed into context – New Zealand regions are much smaller in terms of population size.

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File URL: http://www.treasury.govt.nz/publications/research-policy/wp/2002/02-01/twp02-01.pdf
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Bibliographic Info

Paper provided by New Zealand Treasury in its series Treasury Working Paper Series with number 02/01.

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Length: 81 pages
Date of creation: Mar 2002
Date of revision:
Handle: RePEc:nzt:nztwps:02/01

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Keywords: Regional labour market adjustment; Internal migration;

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References

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  1. Guy Debelle & James Vickery, 1998. "Labour Market Adjustment: Evidence on Interstate Labour Mobility," RBA Research Discussion Papers rdp9801, Reserve Bank of Australia.
  2. Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
  3. Runkle, David E, 1987. "Vector Autoregressions and Reality," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(4), pages 437-42, October.
  4. Decressin, Jörg & Fatás, Antonio, 1994. "Regional Labour Market Dynamics in Europe," CEPR Discussion Papers 1085, C.E.P.R. Discussion Papers.
  5. Papps, Kerry L. & Newell, James O., 2002. "Identifying Functional Labour Market Areas in New Zealand: A Reconnaissance Study Using Travel-to-Work Data," IZA Discussion Papers 443, Institute for the Study of Labor (IZA).
  6. Timothy J. Bartik, 2003. "Local Economic Development Policies," Upjohn Working Papers and Journal Articles 03-91, W.E. Upjohn Institute for Employment Research.
  7. David E. Runkle, 1987. "Vector autoregressions and reality," Staff Report 107, Federal Reserve Bank of Minneapolis.
  8. Antonio Spilimbergo & Eswar Prasad & Paolo Mauro, 1999. "Perspectives on Regional Unemployment in Europe," IMF Occasional Papers 177, International Monetary Fund.
  9. Hayden Glass & Wai Kin Choy, 2001. "Brain Drain or Brain Exchange?," Treasury Working Paper Series 01/22, New Zealand Treasury.
  10. Andrew Coleman, 1999. "Economic Integration and Monetary Union," Treasury Working Paper Series 99/06, New Zealand Treasury.
  11. Fredriksson, Peter, 1999. "The Dynamics of Regional Labor Markets and Active Labor Market Policy: Swedish Evidence," Oxford Economic Papers, Oxford University Press, vol. 51(4), pages 623-48, October.
  12. Sharon McCaw & C John McDermott, 2000. "How New Zealand adjusts to macroeconomic shocks: implications for joining a currency area," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 63, March.
  13. David C Maré & Wai Kin Choy, 2001. "Regional Labour Market Adjustment and the Movements of People: A Review," Treasury Working Paper Series 01/08, New Zealand Treasury.
  14. Timothy J. Bartik, 1991. "Who Benefits from State and Local Economic Development Policies?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wbsle, December.
  15. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
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Citations

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Cited by:
  1. Dave Maré & Jason Timmins, 2003. "Moving to Jobs?," Labor and Demography 0309003, EconWPA.
  2. Suzi Kerr & Andrew Aitken & Arthur Grimes, 2004. "Land Taxes and Revenue Needs as Communities Grow and Decline: Evidence from New Zealand," Working Papers 04_01, Motu Economic and Public Policy Research.
  3. Jacques Poot & Bill Cochrane & Sandra Baxendine, 2005. "Description and Spatial Analysis of Employment Change in New Zealand Regions 1986-2001," Population Studies Centre Discussion Papers dp-57, University of Waikato, Population Studies Centre.
  4. Stillman, Steven & Velamuri, Malathi & Aitken, Andrew, 2010. "The long-run impact of New Zealand's structural reform on local communities," Journal of Comparative Economics, Elsevier, vol. 38(4), pages 432-448, December.
  5. David C. Maré & Michelle Poland, 2005. "Defining Geographic Communities," Working Papers 05_09, Motu Economic and Public Policy Research.
  6. Suzi Kerr & Andrew Aitken & Arthur Grimes, 2004. "Land Taxes and Revenue Needs as Communities Grow and," Public Economics 0403001, EconWPA.
  7. John Janssen, 2002. "Long-term fiscal projections and their relationship with the intertemporal budget constraint: An application to New Zealand," Treasury Working Paper Series 02/05, New Zealand Treasury.

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