Motu News - August 2018

13/08/2018

From the Interim Director of Motu Research
Lesley Haines web2Over the past few months, by my quick count, Motu researchers have completed more than twenty external presentations, twelve externally published articles, eight Motu working papers and, in several cases, significant media comment.

At the same time, six new staff have started, including three new fellows (one senior) and two new research analysts. I encourage you to read more about our new fellows below, as Niven and Elodie bring significant depth to our environmental team and Lynn provides us with a welcome new string to the Motu bow with her interest in health economics.

Motu is not just focussing on the senior research level however. One of our founding motivations is capacity building and we recently introduced the Motu Quantitative Economics Āheitanga Scholarships as the first step that Motu offers in its pathway to a profession in economics. For this scholarship, we offer eight $1,000 prizes (one for each NZ university) to a student of Māori descent who intends to study economics and is planning to enrol in a second year econometrics course, or equivalent quantitative economics course. Applications for the Āheitanga Scholarships are now open and join our internship programme, the Frank Holmes Memorial Prize and our recruitment and support of early career researchers in our commitment to improving the quality of economic research in New Zealand and internationally.

If you want to know more about anything in this newsletter, please feel free to contact me on lesley.haines@motu.org.nz

Lesley Haines
Interim Director


 

New Motu Fellows

Niven Lynn Elodie

Niven Winchester - Senior Fellow
Prior to joining Motu in August, Niven was a Principal Research Scientist at the Massachusetts Institute of Technology Joint Program on the Science and Policy of Global Change. Niven is an expert in general equilibrium analysis and modelling. His research focuses on analyses of climate, energy and trade policies using computable general equilibrium models. Recent studies assess the effectiveness of border carbon adjustments, China’s trade-embodied CO2 emissions, the feasibility, costs, and environmental implications of large-scale biomass energy, and the economic and emissions impacts of US aviation biofuel goals.

Niven’s research has informed several organizations on trade and energy issues, including the OECD, the Federal Aviation Administration, and the New Zealand Ministry of Foreign Affairs and Trade. He was named a Global Trade Analysis Project Research Fellow for the periods 2013-2016 and 2017-2020 for outstanding research. Possibly more importantly for New Zealanders, Niven also has an interest in sports economics and his research on sports ranking systems was the catalyst for the change to the bonus point system in Super Rugby in 2016. Dr Winchester is also the founder of Rugby Vision, a website that predicts rugby match outcomes.

Lynn Riggs - Fellow
Lynn Riggs joined Motu as a Fellow in July 2018 after working for the US government for 20 years. Lynn most recently worked for the US Commodity Futures Trading Commission, the primary regulator of swaps and futures markets. Prior to that, she worked at the US Bureau of the Census and the US Centers for Disease Control and Prevention. She also taught health economics and microeconomics as an adjunct professor at DePaul University in Chicago.

Lynn has worked extensively with large, confidential data sets in the US, including the US Longitudinal Business Database (LBD) and other firm-level data. Her research interests are in labour, health, education, and financial economics. Lynn received her PhD from the University of Wisconsin-Milwaukee.

Elodie Blanc - Fellow
Elodie Blanc joined Motu as a Research Fellow at the beginning of August. She is also a Research Scientist at the MIT Joint Program on the Science and Policy of Global Change. Elodie completed her graduate studies at École des Hautes Etudes en Sciences Sociales and the University of Otago. Her research interests include agricultural economics, applied econometrics, water modeling and crop modeling.

Elodie was the lead researcher in the development of the US Water Resource System model – an optimization model of US water resources allocation at the river-basin level. She has also applied econometric analyses to large geospatial datasets to determine the effect on crop productivity of climate change, small and large dams, water availability, biodiversity, and typhoons. She recently participated in the Agricultural Model Intercomparison and Improvement Project (AgMIP), a forum that brings together researchers from around the world to compare agriculture, economic and climate models. Her most recent research consist of applying econometric techniques to emulate outputs from complex bio-physical crop models.


EQC flood claims come from the rich and close to the coast

Unsplash Auckland lowres haikuSince the turn of the century, more than 25,000 claims worth nearly $300 million have been paid out by the Earthquake Commission (EQC) for damages caused by wild weather. EQC covers homeowners for damage to land (and in some cases to dwellings and contents) caused by landslip, storm or flood. Between 2000 and 2017, the mean amount paid out to claimants was $11,420.

With climate change it’s vital to know how weather-related events translate into financial liabilities for the Crown. Recent research from Motu Economic and Public Policy Research and Victoria University is the first in-depth analysis of EQC claims for weather-related events and forms the beginning of understanding what we may face in the future. This research received support from the Deep South National Science Challenge and the Resilience National Science Challenge.

Locations with a median income in the top forty percent of incomes tend to report more than half of the total claims and pay-outs made. This suggests that, after extreme weather events, higher-income families make more frequent use of EQC insurance and claim more payment than the average New Zealand family. The reasons for this increase in EQC pay-outs associated with higher income households are not yet entirely clear. They could be associated with better access to the system, higher exposure due to location preferences of various income groups, or higher damages caused by higher asset values (e.g. larger homes and larger housing footprints).

While the average property in NZ is approximately 11km away from the coast, the average property lodging a claim to EQC after a weather event is located only 6km away. More on this research...


Worsening of gender wage gap one of the penalties of becoming a mother

Beach HaikuNew Zealand is similar to the rest of the world in that the gender pay gap is larger among parents than people without children, according to a recent Motu working paper by Dr Isabelle Sin, Fellow at Motu and Prof Gail Pacheco and Dr Kabir Dasgupta from AUT.
 
Across the research sample, the hourly wage difference was 5.7 percent between similar men and women without children, but 12.5 percent between men and women who were parents. The impact of parenthood is especially noticeable for women who were in a high-income bracket before giving birth and who returned to work quickly after becoming parents. Prior to parenthood, these women experienced rapid income growth--they were on a trajectory to be very high earners. After they returned to work, often with reduced hours, their earnings were lower and grew at a crawl. This dampening of the income growth of top-earning women helps explain why relatively few women appear in the highest income brackets in New Zealand. A fast return to employment did have some benefits, though: their hourly wages didn’t fall as much as the wages of their slower-returning colleagues.
 
In contrast, low-income women, such as young mothers, experienced small monthly income decreases with parenthood and similar income growth rates before and after having children. 

When men became parents, their hourly wages weren’t significantly affected. Women, on the other hand, faced 4.4 percent lower hourly wages than they could have expected if they hadn’t had children. The longer mothers stayed at home, the bigger the drop in their hourly wages, with women who were out of paid work for more than a year experiencing an 8.3 percent wage penalty. Only some of this drop in pay can be explained by mothers moving to lower-paying jobs.
 
Before becoming mothers, Māori and Pasifika women were far more likely not to be employed than Pākehā women, but this gap narrowed in percentage point terms after they became mothers. Pākehā mothers have a 59% employment rate in their child’s tenth year compared with 41% for Pasifika mothers and 45% for Māori mothers. 

Read the paper here.


HRMI's South Africa Workshop

police 1167101 lowres2Forty-five people from thirty-one countries will meet in Johannesburg in September to discuss the Human Rights Measurement Initiative (HRMI). Now that HRMI has launched its data viz website and the results of the pilot study, the purpose of the workshop will be to co-design ways in which people around the world can use HRMI data for impact, and to plan the next phase of HRMI’s development. The goals of the workshop are:

  • Participants learn how to download, analyse, interpret, and use HRMI data to maximise advocacy effectiveness in their countries, and are able to help others learn the same.
  • To build strong connections and engagement among participants in order to support effective collective action in the future.
  • To deepen our understanding of what the data are telling us, how we can improve them, and what HRMI should prioritise in terms of coverage expansion of countries and rights over the next two to three years.

Co-design is an important principle for HRMI because it fits with its values of collaboration, innovation and transparency. HRMI is co-hosting this workshop with Amnesty International Southern Africa and OSISA from 12 to 14 September 2018 in Johannesburg, South Africa.


Motu Quantitative Economics Āheitanga Scholarship

The Motu Quantitative Economics Āheitanga Scholarship is just the first step that Motu offers in its pathway to a profession in economics. Each year we offer eight $1,000 scholarships (one for each NZ university) to a student of Māori descent who intends to study economics and is planning to enrol in a second year econometrics course, or equivalent quantitative economics course. The purposes of the award are to

  • Enhance New Zealand’s research capacity and support sound public policy by encouraging students of Māori descent to learn to understand quantitative research, and set them on a track that will allow them to become quantitative researchers.
  • Provide promising students with career guidance and mentoring from top researchers.
  • Build networks between researchers and future leaders.

Applications for the scholarship are open until 24 August.


In the News

Wage penalty of motherhood - revealed - RNZ Nine to Noon
More weather-related EQC claims closer to the coast
Can government-funded fiber networks close digital divides? - AEI
Isabelle Sin appointed to Fair Pay Agreement Working Group
Motu research analysts on starting trade wars, football, hitting a plateau in life expectancy and sports records, various office squabbles, physics envy, questions about the value of teaching, and their favourite playground for data visualisation
Budget Hot Takes from Motu Researchers
New data tool scores Australia and other countries on their human rights performance

New Motu Publications

Working Paper 18-06 “Sustainable economic policy and well-being: The relationship between adjusted net savings and subjective well-being.” by Mubashir Qasim and Arthur Grimes. 2018
This paper looks at subjective well-being and a country’s adjusted net savings, which is a common proxy for long term sustainable development. (Adjusted net savings is also known by other names, e.g. Genuine Savings.) We explore the relationship between individual subjective well-being and sustainable economic development as well as looking at results for different groups. We analyse the relationship between subjective wellbeing (SWB) and the World Bank’s measure of a country’s economic sustainability, adjusted net savings (ANS). We model SWB at individual level and at aggregated group level as a function of past ANS levels, after controlling for a country’s initial levels of SWB. The empirical models utilise World Values Surveys (WVS) data for self-reported life-satisfaction (our proxy for SWB). Our results show that ANS is negatively associated with future SWB outcomes over relatively short timespans (10-15 years) but this relationship is neutralised, or even reversed, for a longer timespan (20 years). The results demonstrate an important challenge in political economy. Governments that choose to save less in the short term may be able to spend more on the well-being of the current generation (i.e. current voters) but they diminish the reserves available to improve future generations’ well-being. At a more technical level, our results reinforce the concept that ANS is a useful sustainability indicator for infinite (or at least very long) time horizons, but it is not a good indicator of well-being developments over short time horizons.

Working Paper 18-07 "Moving towards happiness.” by Arthur Grimes and Dennis Wesselbaum. 2018
Why do people migrate from one country to another? People may move not just to increase their income but also for their broader wellbeing, e.g. to enjoy a better lifestyle. Prior research has established that income differences between destination and origin countries of prospective migrants play a part in decisions to move. Our research looks at how ‘happiness’ (i.e. subjective wellbeing) factors into the decision to migrate. We look at how ‘happy’ a country is on average and what this explains about migration between origin and destination countries. Happiness here reflects the mean level of surveyed life satisfaction in a country. We also look at the standard deviation of happiness to see whether inequality in happiness within a country has an impact on migration decisions. The study indicates the need to incorporate broader measures of wellbeing, including both pecuniary and non-pecuniary factors, when modelling migration choices.

Working Paper 18-08 "Parenthood and labour market outcomes" by Isabelle Sin, Kabir Dasgupta and Gail Pacheco. 2018
This paper is an initial exploration of what we can learn regarding the drivers of the gender pay gap in New Zealand from combining administrative wage data, birth records, and survey data on hours worked and earnings. Our particular focus is the role of parenthood penalties in this pay gap. In NZ, as internationally, the gender pay gap is larger among parents than non-parents, though the mechanisms driving this relationship are not entirely clear. We use administrative wage data to describe the distribution of how long women are out of paid employment after having their first child and how this differs with pre-parenthood income. We then look at employment rates and wage earnings among employed women each month in the five years before and ten years after birth of their first child. We also compare women who spend different lengths of time out of employment both overall and within each pre-parenthood earnings quartile. Although this does not strictly isolate the causal effect of length of time out of employment on subsequent monthly earnings, it does show how, within earnings quartiles, women who return quickly to work increase their earnings lead over those who return more slowly.

Working Paper 18-09 "Public insurance and climate change (part one): Past trends in weather-related insurance in New Zealand" by David A Fleming, Ilan Noy, Jacob Pástor-Paz and Sally Owen. 2018.
Climate  change appears to be increasing the frequency and magnitude of extreme weather events, negatively affecting communities as well as posing long-term sustainability challenges to insurance (risk transfer) mechanisms. New Zealand’s public natural hazard insurer, the Earthquake Commission (EQC), covers homeowners for damage to land (and in some cases to dwellings and contents) caused by landslip, storm or flood. We comprehensively explore the EQC claims data to investigate these weather-related claims from 2000-2017. We find no clear upward trend yet emerging in the number of claims or their value. We find that the northern regions of both islands are the source of most claims, that only a handful of weather events caused a large proportion of EQC’s weather-related pay-outs, that the average property lodging a weather-related claim is located twice as close to the coast as the national average, and that properties with claims usually are cited on much steeper land than the typical property in New Zealand. We also explore their relation between claims and socio-economic characteristics, finding that higher income neighbourhoods appear to be those most benefiting from the EQC coverage for weather events. 

Working Paper 18-10 "Do housing allowances increase rents? Evidence from a discrete policy change" by Dean Hylsop and David Rea. 2018
A major concern with demand side housing subsidies to low-income tenants is the extent to which they may be captured by landlords in the form of higher rents. The Accommodation Supplement (AS) benefit is the largest housing subsidy policy in New Zealand. A 2005 policy change created a new AS-area around central Auckland that resulted in an increase in AS entitlement for residents within the area compared to those outside. In this paper we exploit the natural experiment created by this policy change to evaluate whether the increase in accommodation support for recipients in the new area led to relatively higher rents than paid by recipients outside the boundary. We use administrative data for a sample of AS recipients on either side of the new area boundary over the four-year period spanning the policy change. Our analysis shows that as a result of the policy change, recipients on the inside of the boundary received around $6.81 per week more in total accommodation support in the second year after the policy was implemented. We estimate that weekly rents increased on average about $2.44 more inside the boundary (36 percent of the increase in AS) and, as expected, the impacts were stronger at higher quantiles of the rent distribution. We also find that the rent increases were concentrated among families with children, and present some evidence that this reflected increased spending on housing (which may have reduced over-crowding), rather than a wider increase in rental prices.

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