Motu News March 2018

Mar 9, 2018

From the Interim Director of Motu Economic and Public Policy Research

Years ago, when I was working at the NZ Treasury, we became one of Motu’s first clients. From the beginning, I was impressed with the vision which the founders, Suzi and Dave, had for an independent think tank contributing to New Zealand, with high calibre policy relevant research and dialogue. Over nearly two decades, across many parts of the public sector, I had many interactions with Motu and always appreciated the calibre of their work and their willingness to engage.

At Motu, we are contributing across many fields both nationally and internationally. Since I began in January, I have seen the impact Suzi Kerr is having internationally on the mitigation of climate change in countries as varied as South Korea and Colombia. I am watching with interest the impact Arthur Grimes's work on wellbeing is having in government circles, and enjoying internal seminars on forthcoming papers on a wide range of issues from extreme weather and the EQC, the digital divide and the measurement of international human rights. Our talented team punches well above its weight.

When I was asked to join the Board of Trustees in 2016, I was happy to come on board. When Adam Jaffe stepped down, I agreed to take on the Interim Directorship while we continue to search for someone who can match the excellence of Motu staff at the top level. I am looking forward to further interacting with our stakeholders and getting to know even more about the organisation and our research. Please feel free to contact me on lesley.haines@motu.org.nz.
Lesley Haines
Interim Director

E-Mission Possible: Roundtable on thorny questions for a net-zero New Zealand

What does an effective climate change policy package look like for New Zealand? What new insights are emerging from the Productivity Commission's recent work in this area?

This event is the culmination of a series of roundtables bringing together diverse experts from New Zealand and overseas to shed new light on particularly thorny questions for New Zealand’s low-emission transition. The series is being convened by Motu Economic and Public Policy Research in collaboration with the New Zealand Productivity Commission, the Institute for Governance and Policy Studies at Victoria University of Wellington, and the Environmental Defence Society.

8:00 am – 1:00 pm, Friday 13 April 2018
Te Auaha, 65 Dixon Street, Wellington
Please register in advance by 10 April

The roundtable will begin with keynote addresses by Cameron Hepburn, Oxford University, and Jason Gray, California Air Resources Board, by video conference. From there, staff from the Productivity Commission will provide an update regarding their inquiry on Opportunities and Challenges of a Transition to a Lower Net Emissions Economy for New Zealand. Following comments by Motu, distinguished panellists and other participants will look at questions related to directing mitigation policy and action for results.

Participation in this roundtable is open to all and will include experts and decision makers from government, business, research, and civil society organisations. There is no charge to attend. Seating is limited and participants are asked to register in advance by 10 April.

Productivity Work

Motu researchers recently completed work on two papers researching different elements of productivity in New Zealand. One examined worker flow and productivity in the construction sector, while the other looked at how kiwi firms learn and the influence on their performance.

Worker flows, entry and productivity in NZ's construction industry
With plans for building 100,000 new homes over the next ten years, construction is a sector at the heart of questions about New Zealand’s productivity. New research by Adam Jaffe and Nathan Chappell from Motu finds the construction sector is very dynamic. Firms with new workers show higher productivity, especially if these workers come from high productivity construction firms. The study suggests that around 75 percent of the higher productivity is because good firms tend to hire good people and around 25 percent is due to an increase in knowledge.

The research found that less productive firms tend to have more new migrant labour, but also that productivity doesn’t decrease when a given firm hires more migrants. The study has a caveat that we can’t say for sure what hiring new migrants does. It does however, suggest that the origin of new workers, matters little to firm productivity, whether they come from overseas or from other industries.

The paper “Worker flows, entry, and productivity in New Zealand’s construction industry” is now available on the Motu website. This work was funded by BRANZ.

Absorptive Capacity in NZ firms: Measurement and Importance
There are two common policy approaches used to improve firm productivity, the first is to improve the business environment, while the second works at a more individual organisation level. The new research by Prof Richard Harris (Durham University) and Trinh Le (Motu) found that firms with a high ability to learn tend to undertake research and development and be New Zealand-based multinationals. They also tend to be larger firms that employ high numbers of professionals, managers and technicians.

The paper suggests that the activities of NZ Trade and Enterprise and Callaghan Innovation, while important, may have limited impact on absorptive capacity as they have focused on boosting exports in around 700 firms (NZTE) and on smaller firms with limited ability to export (Callaghan Innovation). The research indicates that because the market for knowledge about new opportunities isn’t developed, the firm must build capabilities inside the business to assist knowledge creation and capture.

The paper “Absorptive Capacity in NZ firms: Measurement and Importance” is now available on the Motu website. This work was partially funded by the New Zealand Productivity Commission.

Understanding how ideas flow

It’s been estimated that world GDP would be just 6 percent of its current level if countries didn’t share ideas, but until recently we’ve known little about how the flow of ideas internationally actually works. Isabelle Sin, a Fellow at Motu, used book translations to examine how physical and cultural difference affect the flow of knowledge between countries. She used newly digitised data on a million translations of books between 1949 and 2000 in her research.

Her analysis showed that the further apart countries are, the fewer translations are made. Fiction and other cultural titles are translated more often than natural and applied science books. This suggests cost, rather than cultural difference, is likely to be a major reason translations decrease with distance. The research showed countries that would most benefit from exposure to foreign ideas face greater barriers to accessing these ideas. However, the impact of distance has decreased over time, and also decreases as immigration increases and access to mobile phones improves. Interestingly, religious difference also inhibit translations for countries in the lowest quartile of GDP per capita. However, these countries are actually more likely to translate from languages that are more distant from their own.

Isabelle Sin’s article “The Gravity of Ideas: How Distance Affects Translations” was published by the Royal Economic Society’s The Economic Journal early in 2018.

New staff

Over the last few months, Motu has grown and we're proud and excited to introduce our new staff members.

Adam Jaffe - Senior Research Associate
While not exactly new to Motu, our previous Director and Senior Fellow is taking on a new role, remaining connected to Motu as a Senior Research Associate. Adam will be returning to Boston shortly, but will visit New Zealand and zoom in for various research projects.

Jo Hendy - Environment Team Director and Policy Fellow
Jo joins Motu from the Office of the Parliamentary Commissioner for the Environment, where she was the Director of Research and Analysis for ten years. She will continue on at PCE one day a week for the next few months. Jo will manage Motu’s environment work and will concentrate on water quality as a Policy Fellow.

Angela Halliday - Partnerships Director, Deep South National Science Challenge
Angela recently joined Motu as Partnerships Director for the Deep South National Science Challenge. She is literally from the Deep South, originally hailing from a sheep farm near Edendale. Before coming to Motu, Angela was the Natural Resources and Environment Manager for Horticulture New Zealand, an industry organisation representing fruit and vegetable growers. She focused on resource management issues at a regional and national level.

Ben Davies - Research Analyst
Ben joined Motu in January 2018 after completing a BSc(Hons) in economics and mathematics at the University of Canterbury. His honours thesis analysed the relationship between insurance and saving as tools for hedging future income. While at Motu, Ben is helping Dave Maré analyse industrial relatedness and specialisation across NZ cities. This project is part of Te Pūnaha Matatini's portfolio of research into complex economic and social systems.

Elizabeth Heritage - Communications Lead, Human Rights Measurement Initiative
Elizabeth is a communications professional and marketer with a strong interest in social justice. She works for Motu on the Human Rights Measurement Initiative (HRMI) two days a week, and the rest of the time is a freelancer in the publishing industry and NZ media. She has a background in open copyright licensing and is interested in the ways that opening up data and knowledge can contribute to the advancement of human rights.

Public Policy Seminar: The effect of transport outcomes on location choice in Australian cities.

Speaker: Stuart Donovan, Principal Consultant, Veitch Lister Consulting Ltd, PhD student at Vrije Univesiteit, Amsterdam.
12.30-2.00pm, Thursday 15 March 2018, Aonui Lecture Theatre, Royal Society of New Zealand, 11 Turnbull St, Thorndon

Stuart will present the results of ongoing research into how transport outcomes, such as travel-time and travel-distance, affect where people choose to live and work. The intuition underlying his analysis is that commuting data reveals information on people's preferences for home and work locations, and the perceived costs of travelling between the two. Using commuting and transport data from three Australian cities, he finds robust evidence that transport outcomes affect location choice. While the magnitude of the effects vary by city and model specification, they are almost always statistically and economically significant. Whereas existing transport models focus on predicting mode and route choice, Stuart argues that one's choice of location is more fundamental and largely determines other transport choices. To finish, he will devote considerable attention to the implications of his research for transport and land use policy, especially with regards to major transport investments and road pricing.

Bio: Stuart is an engineer and economist with over 10 years' experience working as a consultant in the transport industry in New Zealand and Australia. He holds masters degrees in engineering and economics, and is currently studying towards a PhD in Economics at Vrije Universiteit, Amsterdam, where he is being supervised by Henri L. F. de Groot and Jan Rouwendal. Stuart's research interests include spatial, transport, and urban economics; transport and land use policy; and agglomeration economies.

MOTU NEWS

NEW MOTU PUBLICATIONS

"Worker flows, entry, and productivity in New Zealand’s construction industry" Working Paper 18-02 by Adam Jaffe and Nathan Chappell
We use administrative data on the population of New Zealand construction firms from 2001-2012, along with linked data on their employees and working proprietors, to study the relationships among worker flows, entry, and firm productivity. We find that job churn is prevalent in construction, with around 60 percent of firm-worker pairs not existing previously or not existing subsequently. The data also show that firms gaining or losing any labour are more productive than static firms, and that firms gaining labour from other construction firms are 4-6 percent more productive than the industry average in a given year. Our analysis suggests such firms are productive in part because of knowledge flows from other construction firms; in our preferred specification, with firm fixed effects, a standard deviation increase in the productivity of new employees’ previous firms is associated with a 0.6 percent increase in productivity. New entrants are more productive than pre-existing firms. Firms that enter briefly and disappear exhibit high productivity for that brief period, and firms that enter and persist exhibit a persistent productivity advantage that averages about 5%, but which grows as experience accumulates. The entry and worker-knowledge-flow phenomena are distinct, in that the entry effect is not explained by employee composition, and non-entrant firms also benefit from worker knowledge flows.

"Absorptive capacity in New Zealand firms: Measurement and importance" Working Paper 18-01 by Richard Harris and Trinh Le
To the best of our knowledge, this paper reports the first set of nationally representative results on the importance of ‘absorptive capacity’. Absorptive capacity is generally defined as a firm's ability to internalise external knowledge. Using data principally from the New Zealand Business Operations Survey, we measure absorptive capacity across a 10-year period and investigate if it remains stable in the long term. This is followed by considering how firms’ characteristics vary across levels of absorptive capacity and most importantly whether such capacity determines firms’ productivity performance across the primary, manufacturing and service sectors. Our results show that relative to other influences, absorptive capacity as measured here has a substantial influence on exporting, innovation, and undertaking R&D. Set against relatively poor performance, the paper concludes with a discussion of how government should consider helping firms to boost their levels of absorptive capacity.

"Mapping the global influence of published research on industry and innovation" Nature Biotechnology, January 2018 by Osmat A Jefferson, Adam Jaffe, Doug Ashton, Ben Warren, Deniz Koellhofer, Uwe Dulleck, Aaron Ballagh, John Moe, Michael DiCuccio, Karl Ward, Geoff Bilder, Kevin Dolby & Richard A Jefferson
Measuring citations to scholarly works in the global patent literature enables assessment of the influence of published research on invention, industry and enterprise, at the individual and institutional level.
Public research is critical to the economy and to society. However, tangible economic and social impact occurs only when research outputs are combined, used and reused with other elements and capabilities, to deliver a product, practice or service. Assessing the context and influence of scholarship during the dynamic process of innovation rather than measuring ex post impact, may improve performance. With this aim, we have integrated and interconnected scholarly citations with global patent literature and created new tools to link the scholarly literature with the patent literature.

"Equivalent representations of discrete-time two-state panel data models" Economics Letters, Vol 163 p65-67 by Tue Gørgens and Dean Hyslop
There are two common approaches to analyzing discrete-time two-state panel data: one focuses on modeling the determinants of state occupancy, the other on modeling the determinants of transition between states. This note shows that there are one-to-one correspondences between the two representations, between the two probability distributions in an unrestricted context, and between low-order Markov models of state occupancy and semi-Markov models of transition between states with strictly limited duration dependence. This article is behind a paywall.