Motu News March 2016


CG958 motu WEBIn this issue of our e-newsletter, you will learn about the World Bank's emissions trading system handbook - a project co-led and co-authored by Motu that will be used around the world. This kind of research is what makes Motu the top-ranked economics research organization in NZ. We are proud of the research we do, but we are also committed to public dissemination and education, and to working to make sure that research evidence supports the formation of public policy in NZ. We do this through vehicles like this newsletter, our website, our Public Policy Seminar series, and countless meetings and consultations with government officials, other NGOs and citizen groups.

Motu is a public charity, but we do not have a large endowment, so all of our activities have to be funded each year. Our research is funded by government ministries and foundations that pay for particular research projects. But these research funders do not generally pay for the dissemination and implementation of research results. These activities are largely funded by donations to the Motu Research and Education Foundation. We have a handful of ‘patrons,’ whose logos you can see below. But this kind of support is getting harder and harder to access, as government agencies and private firms find themselves needing to tighten their belts.

Over the next few months we will be working to further Motu's support, with the aim of more actively spreading the word about solid economic research as a foundation for public policy. If you have an interest in supporting and promoting quality economic research please contact me.

Finally, a thank you to all of you who completed the recent Massey/AUT survey into electronic newsletters. We will make sure that we link you to the results, once Elizabeth Gray and Kane Hopkins have published their research. You will also see some improvements to our newsletter in response to your feedback.

Adam B. Jaffe

Emissions Trading in Practice: A handbook on design and implementation

CG511 motu WEBSuzi Kerr has spent much of the last year co-leading a project for the World Bank – a Handbook explaining how to design an Emissions Trading Scheme written in association with the International Carbon Action Partnership. This document launched yesterday and is available here.

For many jurisdictions, carbon pricing is emerging as a key driver in moving to a low emission future. As of 2016, ETS were operating across four continents in 35 countries, 12 states or provinces, and seven cities covering 40% of global GDP. Many countries have indicated that they intend to use emissions trading systems as part of their effort to meet their commitments under the Paris Agreement.

Carbon pricing by itself cannot address all of the complex drivers of climate change. However, as part of an integrated policy package, carbon pricing can harness markets to drive down emissions and help build the ambition needed to sustain a safer climate.

An ETS is a policy tool and it can be designed to achieve a range of outcomes – environmental, economic, and social. Every country or jurisdiction has different requirements, due to its emissions profile, the strength of its emission reduction commitment relative to its local mitigation opportunities, its political priorities and its existing regulatory structure. This handbook provides a generically useful way forward that can be used straight off the bat in places like Egypt, Chile, Colombia, and Mexico. Best of all it will help them design a system that will work for their local conditions.

ETS design in ten steps

Emissions Trading in Practice: A handbook on design and implementation sets out a ten-step process for designing an ETS. At each step, there are a series of decisions or actions that will shape major features of the system. The steps are:
• Decide the scope
• Set the cap
• Distribute allowances
• Consider the use of offsets
• Decide on temporal flexibility
• Address price predictability and cost containment
• Ensure compliance and oversight
• Engage stakeholders, communicate and build capacities
• Link
• Implement, evaluate and improve

The decisions and actions taken at each step are likely to be interlinked and interdependent, which means the process for working through them will more likely be iterative than linear. For more information on this process, check out the Handbook.

New Working Papers

The specification of dynamic discrete-time two-state panel data models - Working Paper 16-01
Dean Hyslop and Tue Gørgens from Australian National University compared two commonly used alternative approaches for modelling binary outcomes in panel data: dynamic binary response (DBR) panel data and multi-spell duration (MSD) models. This is an applied econometrics project that shows, theoretically, that each method is nested within a broader framework and, in practice, the dynamic panel data models are more parsimoniously specified than the multi-spell duration models. In a case study application, it is shown that the DBR model is unacceptably restrictive (statistically) compared to the MSD model.

Can “happiness data” help evaluate economic policies? - Working Paper 16-02
Robert MacCulloch from the University of Auckland starts this paper by asking the reader to imagine a government confronted with a controversial policy question, such as whether it should cut the level of unemployment benefits. Will social welfare rise as a result? Will some groups be winners and other groups be losers? Will the welfare gap between the employed and unemployed increase? “Happiness data” offer a new way to make these kinds of evaluations. These data allow us to track the well-being of the whole population, and also sub-groups like the employed and unemployed people, and correlate the results with relevant policy changes.

A Rough Guide to New Zealand's Longitudinal Business Database (2nd edition) - Working Paper 16-03
Richard Fabling and Lynda Sanderson provide an updated rough guide to New Zealand's Longitudinal Business Database. The LBD is a rich resource for understanding the behaviour of New Zealand firms. This paper provides an introductory guide to the content and structure of the data aimed at new and prospective users. Where relevant, it references other publications which provide greater detail on particular aspects of the data. It also briefly describes access protocols for researchers, and processes for updating and expanding the database.

Hautahi Kingi wins Motu Thesis Scholarship

Hautahi Kingi at Cornell University lowresHautahi Kingi (Nga Rauru, Te Atihaunui a Paparangi) a PhD candidate in economics at Cornell University in the United States is the winner of this year’s $10,000 Motu Thesis Scholarship. Mr Kingi has two elements to his research, one around immigration and the other looking into tax and consumption.

“The first part of my dissertation investigates how migrants affect the well-being of native born workers,” said Mr Kingi. “Restrictions on labour mobility are arguably the largest policy distortion in the international economy. While goods and capital are now almost completely free to roam, humans are not. Millions would greatly benefit from migration, but labour movements are restricted because of concerns about the potential negative consequences for native born workers. A deeper understanding of these consequences are crucial for developing future migration policy.”

The second part of his PhD work looks at the ways in which the US federal tax system acts as an automatic stabiliser to the economy, and examines how various tax policies and provisions distort this. More...


Applications for full-time permanent Research Analyst and temporary Summer Intern positions beginning in summer 2016/17 are currently open. If you know anyone who wants to get their hands dirty with every stage of the research process, working closely with a senior researcher with a PhD from a renowned university such as Harvard, Stanford, or the London School of Economics, please direct them here.


Time-travelling on the NZ ETS - a great interactive timeline
Former Reserve Bank chair Grimes hits back over insulation 'error' claim -
Suzi Kerr: NZ could be leader influencing carbon trade best practice - Otago Daily Times
Motu research analysts on Auckland NIMBYs, the uneven US recovery, driverless cars, the Robin Hood of science, the cheating economy & more -
Govt likely to scrap cheap emissions charge - RNZ News
The 2014/15 Annual Report from the CaDDANZ team (including Dave Maré) was recently awarded a Gold rating by MBIE.


Leining, Catherine. 2016. "A Timeline of the NZ Emissions Trading Scheme"

16-03 Fabling, Richard and Lynda Sanderson. 2016. "Rough Guide to New Zealand's Longitudinal Business Database (2nd edition)"

16-02 MacCulloch, Robert. 2016. "Can "happiness data" help evaluate economic policies?"

16-01 Gørgens, Tue and Dean Hyslop. 2016. "The specification of dynamic discrete-time two-state panel data models."

15-20 Maré David C., Ruth M. Pinkerton and Jacques Poot. 2015. “Residential Assimilation of Immigrants: A Cohort Approach

15-19 Timar, Levente, Arthur Grimes and Richard Fabling. 2015. “Before a Fall: Impacts of Earthquake Regulation and Building Codes on the Commercial Market

15-18 Maré David C., Dean R. Hyslop and Richard Fabling. 2015. “Firm Productivity Growth and Skill"

15-17 Fabling, Richard and David C. Maré. 2015. “Addressing the absence of hours information in linked employer-employee data

15-16 Thirkettle, Matt and Suzi Kerr. 2015. “Predicting harvestability of existing Pinus radiata stands: 2013-2030 projections of stumpage profits from pre-90 and post-89 forests

15-15 Fabling, Richard and David C. Maré. 2015. “Production function estimation using New Zealand’s Longitudinal Business Database

15-14 Grimes, Arthur, Robert MacCulloch and Fraser McKay. 2015. “Indigenous Belief in a Just World: New Zealand Maori and other Ethnicities Compared

15-13 Apatov, Eyal, Richard Fabling, Adam Jaffe, Michele Morris and Matt Thirkettle. 2015. “Agricultural Productivity in New Zealand: First estimates from the Longitudinal Business Database

15-12: Gush, Jason, Adam B Jaffe, Athene Laws, and Victoria Larsen. 2015. “The effect of public funding on research output: The New Zealand Marsden Fund

15-11 Dorner, Zachary and Suzi Kerr. 2015. “Methane and Metrics: From global climate policy to the NZ farm

15-10 Grimes, Arthur and Marc Reinhardt. 2015. “Relative Income and Subjective Wellbeing: Intra-national and Inter-national Comparisons by Settlement and Country Type

15-09 Grimes, Arthur and Sean Hyland. 2015. “A New Cross-Country Measure of Material Wellbeing and Inequality: Methodology, Construction and Results