Omoniyi Alimi with Dave Maré and Jacques Poot

Transcription

1 ANZ Conference Presentation 28 th June 2013 Revisiting Income Inequality Between and Within New Zealand s Regions: Analysis of Census Data Omoniyi Alimi with Dave Maré and Jacques Poot Sponsored by MBIE funded Nga Tangata Oho Mairangi (NTOM) project NIDEA 1

2 Overview Introduction Data Inter-regional Income Distribution Intra-regional Income Distribution Conclusion NIDEA 2

3 Introduction The distribution of personal income has always been an important issue worldwide The Occupy Movements of included among many other things concerns about growing inequality in the distribution of income NIDEA 3

4 Introduction In New Zealand, protests in 6 cities - Auckland, Wellington, New Plymouth, Christchurch, Invercargill and Dunedin NIDEA 4

5 Introduction New Studies linking income distribution and economic volatility There are lots of studies in New Zealand on income distribution but very few take a regional perspective Karagedikli et al. (2000) analysed the inter and intra-regional income distributions between Spatial dimension of income distribution is important too NIDEA 5

6 Introduction cont d This paper follows on from Karagedikli et al. (2000) to provide evidence of what has happened to income distribution between 1996 and 2006, and compares this with the earlier trends Examines inter-regional and intra-regional distribution of income NIDEA 6

7 Data Census of Population and Dwelling between 1981 and 2006 Gross income from all sources (incl. dividends, interest and social security transfers) available from Census for males Focus on males is to see the census data as a proxy for earnings of fulltime salary & wage earners; results are indicative for women working full-time too NIDEA 7

8 Data Fit in Pareto distribution to the upper income bracket to get average income in the top open ended bracket. NIDEA 8

9 NIDEA 9

10 Inter-Regional Income Distribution Average income increased by 12% between 1981 and 2006 Average income is 27% better in 2006 than in 1996 Average income declined between 1981 and 1991 before starting to increase Year 1981 $34, $29, $27, $30,177 Average Income in 1996 Dollars 2001 $33, $38,303 NIDEA 10

11 Inter-regional Income Distribution Cont d Southland had the highest average income in 1981 but since 1986 Wellington moved into the top place and remained there until Over the period 1981 to 2006, real average income in Auckland and Wellington grew at around 30% while all other regions that had positive growth had rates that ranged from 1% to 7% Between 1996 and 2006, Wellington had the highest growth rate in average income at 16% and Southland had the lowest rate at 4% NIDEA 11

12 NIDEA 12

13 Convergence Neoclassical Growth theory suggest that diminishing returns to capital, diffusion of technological change etc. would lead to interregional income convergence. The study sought evidence for convergence by running a regression in the form : NIDEA 13

14 Convergence of Mean Incomes Cont d The regions with low initial real mean incomes experienced a high growth rate in their real incomes When Auckland and Wellington are excluded, there is evidence of unconditional beta-convergence at the rate of 1.5% with a slope coefficient of and a t statistic of Divide between metropolitan areas of Wellington and Auckland and the rest of New Zealand NIDEA 14

15 Growth rate % Convergence - Including Auckland and Wellington 30% 20% Auckland Wellington 10% Tasman Nelson Canterbury 0% West Coast -10% y = x R² = % -30% Log of 1981 Southland NIDEA 15

16 Convergence - excluding Auckland and Wellington 10% 5% Tasman Nelson Canterbury 0% % West Coast -10% -15% Gisborne -20% y = x R² = % -30% Southland NIDEA 16

17 Intra-regional Distribution - Gini coefficients cumy_inc13 A 0 B fy_inc13 Gini = area A / (area A + area B) NIDEA 17

18 Intra-regional Distribution - Gini coefficients In 1981, Northland had the highest inequality measured by ginis but by 2006, this had changed to Wellington Between 1981 and 2006, all regions experienced increases in gini coefficients compared to 1981 levels Between 1996 and 2006, Northland, Waikato, Gisborne and Southland experienced declines in gini coefficients Convergence of gini coefficients NIDEA 18

19 Intra-regional Distribution - Deciles Nationally, between 1981 and 2006, every decile except the top two deciles (deciles 9 and 10) experienced a decline in real income. The top decile in Auckland experienced the biggest growth in income between 1981 and 2006, followed by Wellington Between 1981 and 2006, Nelson and Tasman are the only regions where the bottom decile (y10) experienced growth in real income Gains across all of the distribution from 1996 to NIDEA 19

20 Intra- regional Distribution - Palma ratios The Palma ratio is the ratio of the income share of the top 10% of the population to the bottom 40% Nationally, in 1981, top 10% earned 1.6 times the bottom 40%. By 2006, the top 10% was earning 2.5 times income of the bottom 40% The top 10% gained more share of income in all regions except in Southland where the top 10% income share declined. NIDEA 20

21 Conclusion Inequality has been growing and the biggest income gains have been occurring at the top By 2006 average real income for males in several regions was less than it was a quarter century earlier Auckland and Wellington had growth experiences that are quite distinct from other regions Convergence in all other regions excluding the metropolitan regions of Auckland and Wellington at rate of 1.5% NIDEA 21

22 Conclusion Gains in income across the distribution between 1996 and 2006 Convergence of the gini coefficients across regions between 1981 and 2006 NIDEA 22

23 Thank you for listening Contact : oba3@waikato.ac.nz NIDEA 23

24 Convergence of Gini Coefficients 45% 40% 35% 30% Wellington 25% 20% 15% 10% West Coast Canterbury 5% -5% y = x R² = % NIDEA 24

25 Regions 1981 Regions 1986 Regions 2006 Southland $ 40,247 Wellington $ 33,441 Wellington $ 49,705 Wellington $ 37,452 Auckland $ 31,460 Auckland $ 44,892 Waikato $ 35,768 Taranaki $ 29,119 Taranaki $ 34,890 Taranaki $ 34,177 Waikato $ 28,354 Waikato $ 34,789 Bay Of Plenty $ 34,159 Southland $ 28,275 Canterbury $ 33,920 Hawke's Bay $ 34,055 Bay of Plenty $ 28,200 Bay of Plenty $ 32,877 Auckland $ 34,020 Hawke's Bay $ 27,792 Nelson $ 32,295 Manawatu-Wanganui $ 33,297 Northland $ 27,665 Southland $ 31,621 Otago $ 32,950 Nelson $ 27,511 Hawke's Bay $ 31,618 Canterbury $ 32,840 Canterbury $ 27,397 Marlborough $ 31,568 Gisborne $ 32,374 Manawatu- $ 26,983 Tasman $ 31,036 Wanganui Northland $ 31,371 Otago $ 26,648 Otago $ 30,615 Marlborough $ 31,300 Gisborne $ 26,075 Manawatu- $ 30,011 Wanganui Nelson $ 30,215 Marlborough $ 25,594 Northland $ 29,439 West Coast $ 29,457 West Coast $ 24,909 West Coast $ 28,833 Tasman $ 29,436 Tasman $ 24,240 Gisborne $ 28,558 NIDEA 25

26 Palma Palma 1981 Palma 2006 Northland Auckland Waikato Bay Of Plenty Gisborne Hawke's Bay Taranaki Manawatu-Wanganui Wellington West Coast Canterbury Otago Southland Tasman Nelson Marlborough National NIDEA 26

27 Growth rates growth. rates Northland Region % Auckland Region % Waikato Region % Bay Of Plenty Region % Gisborne Region % Hawke's Bay Region % Taranaki Region % Manawatu-Wanganui Region % Wellington Region % West Coast Region % Canterbury Region % Otago Region % Southland Region % Tasman Region % Nelson Region % Marlborough Region % NIDEA 27