Motu News October 2018

Oct 30, 2018

From the Interim Director of Motu Research
With sadness, but no little pride I can advise you that Suzi Kerr has accepted a position  as the Chief Economist at Environmental Defense Fund in New York, and will leave Motu in April 2019. Suzi's new role is a recognition of everything she has built over the course of her distinguished career and an acknowledgement of her world-class work.

As you may know, Suzi was one of the founders of Motu and while her day to day contact with the organisation will end, we are pleased that she will continue her connection in an advisory role. We have been blessed to have Suzi’s passion and intellect at Motu and her role in our genesis is part of what makes us the organisation we are today. That legacy will stay with us in how we look to support economic and public policy capacity in Aotearoa and in our commitment to contributing strong, non-partisan research.

Suzi’s career move can also be viewed as part of Motu gaining influence on the international stage. We look to our continuing relationship with Adam Jaffe as an inspiration for how we can work with our distinguished alumni. 

One of the great contributions Suzi made to Motu was in helping to hire Isabelle Sin back in the early 2000s. Izi was one of our first research analysts when she was just out of Canterbury University. She went on to gain an impressive doctorate from Stanford before returning to Motu as a Fellow. This year, we promoted her to Senior Fellow, and watched as she handled media, policy makers, politicians, and researchers with incisive aplomb in relation to her gender wage gap research. Izi has also taken on a big role in mentoring our research analysts and interns and her influence on the future of economics shouldn't be underestimated.

Over the last year we have taken a hard look at how we build capacity for NZ research in the future and have restructured our support for rangitahi Māori into an individual scholarship awarded at each university to a promising student who is planning to study quantitative economics in their second year of university. This has had the added benefit of building relationships with kaiārahi across the tertiary sector. We have now awarded five of these new scholarships and should award another two before the end of the year.

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

Staffing News

Suzi Kerr - leaving Motu
As Lesley mentions above, Suzi Kerr has accepted a position at Environmental Defense Fund in the United States as their Chief Economist. Suzi’s work with EDF will build on the expertise she has developed while at Motu and is a unique opportunity for the contributions she has made to environmental economics in New Zealand to take an even more global form. In addition, Suzi’s appointment strengthens our existing relationship with EDF and we look forward to more exciting opportunities for Motu and EDF to collaborate in the environmental and climate space. 

Suzi will continue working at Motu until April 2019 and we will have an appropriately large celebration in the New Year to send her off with our love.

Isabelle Sin - promoted to Senior Fellow
Isabelle Sin has become our latest Senior Research Fellow, a well-deserved promotion and our first ‘home-grown’ Senior Research Fellow. Isabelle has worked her way up through time spent as a research analyst at Motu in our very early years, to a PhD at Stanford, to a job as a Fellow and this year appointed Senior Fellow: encompassing our building capacity mission in human form.
For more about Isabelle, check out this fabulous piece from Curious Minds.

Edmund Lou - scholarship for PhD study at Northwestern
Edmund was a Research Analyst at Motu and has recently left to take up his full scholarship on a PhD programme at Northwestern University, in Evanston, Illinois. Northwestern is ranked 7th in the US according to US News rankings and specialises in deep theoretical elements of economics and econometrics. Edmund is keen to work at the conjunction of environmental economics and game theory. He also has an interest in political economy. He believes there are many opportunities for climate research in his chosen path and would like to work intensely in theory while helping spread the knowledge to policy people.

Edmund completed his honours degree at the University of Auckland with a focus on game theory. He has worked for Motu for nearly three years in the environmental team. His research has examined what drives nutrient leaching and greenhouse gas emissions. He also worked on a project on options for agricultural emission reductions that have little or no cost. Motu has supported Edmund with a $3,000 scholarship towards his living costs.

Falling in love can increase inequality

The phenomenon whereby the highly-educated have partners who are also highly-educated has gained attention in popular media and academic research as a driver of inequality.

Lead author Omoniyi Alimi of Waikato University, together with Motu’s Senior Fellow Dave Maré and Waikato’s Emeritus Professor Jacques Poot, have just released a Motu working paper examining this kind of ‘matching’. The paper, which is a chapter of Mr Alimi’s about to be submitted PhD thesis on income inequality in New Zealand, shows that, for the full-time employed, people living together with someone with a similar education level leads to bigger income gaps between high-income and low-income couples.
 
The study provides new insights into how inequality within and between New Zealand cities is shaped by the interaction of educational, labour market and social trends. About 20% of the income inequality between different couples is due to this pattern. Over time, the increasing proportion of people with high education levels has led to a greater inequality, particularly in larger cities, where the matching of like with like has become stronger.

Interestingly, the researchers found that the highly educated do not increasingly partner with other highly educated because they favour such partners more than in the past, but simply because there are many more of them in the “marriage market”.
 
The full working paper “Who partners up? Educational assortative matching and the distribution of income in New Zealand.” by Omoniyi Alimi, David C Maré, and Jacques Poot is now available on the Motu website.

Transitions to self-employment and the creation of jobs

The self-employed constitute a significant proportion of the labour force and create a substantial number of jobs for their employees. Self-employment rates vary substantially by sex and ethnicity, with Pasifika-only and Māori-only ethnicity groups having a 9.4 percentage points (pp) and 8.1pp, respectively, lower probability of being self-employed than European-only. These differences are substantial when compared to the overall self-employment rate of 7.5%. While partially explainable by differences in individual characteristics, such as age and migrant status, entrepreneurship gaps persist to some extent for all ethnicity groups relative to European-only, and for females relative to males. For example, the entrepreneurship gap for females represents 48% of the average working proprietor rate after controlling for individual characteristics.

These gaps arise in large part because of differential rates of entry into self-employment and, in the case of non European-only ethnicities, higher attrition rates from self-employment after entry. Controlling for both individual characteristics and prior labour market outcomes, the gap in the working proprietor entry rate for Pasifika-only individuals is -75% of the mean entry rate, and the five-year survival rate gap after entry is -36% of the mean survival rate. For Māori-only ethnicity individuals, the corresponding entry and survival rate gaps are -54% and -18%.

The international literature suggests that differences in access to capital and specific business human capital (from parents or peers for example) may go some way to explaining the residual ethnicity gaps in entrepreneurship. In the latter instance, high-skilled individuals are more likely to reach management positions in firms that would allow them to, perhaps, develop the skills necessary to operate their own business successfully.

The full working paper “Entrepreneurial beginnings: Transitions to self-employment and the creation of jobs.” by Richard Fabling is now available on the Motu website.

Scholarships and Prize Awarded

Prestigious Prize for Top Economic Student
Motu is pleased to announce the top economics tertiary student for 2018 is Nicolas Adams from the University of Canterbury, who has won this year’s Sir Frank Holmes Prize. The accompanying picture shows Nic recieving his certificate from Jo Wills and Pattrick Smellie who sponsor the prize through the Motu Research and Education Foundation.
 
The prize recognises Sir Frank Holmes as one of New Zealand’s pre-eminent economists. It also honours his contribution to the development of public policy over many decades. The $3,500 scholarship is provided by the Motu Research and Education Foundation to New Zealand’s top economics undergraduate student every year. The prize is awarded on the basis of academic achievement. Nicolas, who is in his third year of a Bachelor of Science majoring in Economics and Mathematics, was the clear winner.
 
Many previous Sir Frank Holmes Prize-winners have subsequently become full-time employees of Motu as Research Analysts. Research Analysts are typically honours graduates who spend two to three years working directly with Motu Senior Fellows on Motu research projects. Many have gone from Motu to top international PhD programs or other successful professional trajectories.

First Āheitanga Scholarships Awarded
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. 

2018 is the inaugural year for these scholarships and we are proud to announce the first five winners (with two more to come by the end of 2018):

• Mike Mcinerney-Heather - University of Otago
• Nik Bielski - University of Canterbury
• Poipoia Te Taonga Poia - Victoria University of Wellington
• Danielle Pearce - University of Waikato
• Venus Taare - AUT

Motu News

Charting the Earth’s future for the 21st century: MIT Special Report

Grimes on Wellbeing: How lucky are we?

Curious Minds: Isabelle Sin

The NZ ETS: Beyond the Barricade

Motu researchers on predicting obesity rates from space, reinventing cities, genes associated with education, and the Ig Nobel Prizes: interest.co.nz

IPCC 1.5C special report – Expert Reaction: Science Media Centre

Why NZ’s emissions trading scheme should have an auction reserve price: The Conversation

New Motu Publications

Working Paper 18-11 “International Agricultural Mitigation Research and the Impacts and Value of Two SLMACC Research Projects.” by David Fleming and Kate Preston. 2018 (forthcoming)
Evaluating the benefits of publicly funded research is always a challenging task. This paper cannot produce air-tight quantification of the benefits of Sustainable Land Management and Climate Change (SLMACC) research. We do, however, demonstrate the key building blocks of significant impact have been obtained. First, it is clear that public funding has contributed importantly to New Zealand’s positioning itself as one of the leading global contributors to agricultural mitigation research. Second, the prominence of the research combined with the low likelihood of research occurring on this scale without public support suggests strongly that the results would not have been obtained absent public funding. Finally, though the realization of ultimate environmental and/or economic benefits will depend on the evolution of farming practices and climate change policy settings, the advances in genetic markers for low CH4 animals and identification of emission-reducing management practices have the potential for GHG emission reductions that would be significant in environmental terms, and whose value at likely carbon pricing levels would be in the hundreds of millions of dollars. Although the results discussed are conditional on several factors such as future policy implementation, adoption rates and the practical availability of mitigation options and practices for different farm landscapes; the impacts, economic and environmental values attached to mitigation research cannot be overlooked and provide important insights to the benefits that public investments can make to the development of a more sustainable agricultural system for the country.

Working Paper 18-12 "Entrepreneurial beginnings: Transitions to self-employment and the creation of jobs.” by Richard Fabling. 2018
Owner-operated firms are an important part of the New Zealand economy. They employ approximately 30% of the private-for-profit workforce, as well as providing jobs and income to the working proprietors themselves. This paper addresses two questions: what characteristics are associated with entrepreneurship (starting a self-employed business); and which sorts of entrepreneurs are more successful (create jobs)? We pay particular attention to differences in start-up and survival rates by business owner sex and ethnicity, but also consider whether other individual characteristics (including age and skill) and prior job characteristics also relate to the decision to start a business or to create jobs. We find substantial negative gaps in entrepreneurship for females and non-European-only ethnicity groups – gaps that arise in large part because of differential rates of entry into self-employment and, in the case of non- European-only ethnicities, higher attrition rates from self-employment after entry. These gaps persist in the presence of controls for skill, prior labour market experience and other individual characteristics.

Working Paper 18-13 "Who partners up? Educational assortative matching and the distribution of income in New Zealand" by Omoniyi B Alimi, David C Maré, and Jacques Poot. 2018
Educational assortative matching among couples, i.e. the phenomenon whereby the high-educated have partners who are also high-educated, has gained attention in popular media and academic research as a driver of recent changes in the distribution of household income. We examine the effect of educational assortative matching on the distribution of household income in New Zealand - a country which has experienced rising inequality, increased educational attainment and a relatively low, and falling, wage premium for higher levels of education. Using data from the 1986, 1991, 1996, 2001, 2006 and 2013 Census of Population and Dwellings and a counterfactual randomisation methodology that accounts for secular changes in the educational distribution, we find that educational assortative matching has increased but, contrary to some evidence overseas, this increase was driven by increased matching in the middle of the educational distribution. Spatially, we find higher and increasing levels of educational assortative matching in metropolitan areas compared to non-metropolitan areas where assortative matching was lower and decreasing. We find that educational assortative matching has had an inequality-increasing impact on the distribution of income, especially for the full-time employed – for whom the matching impact is around 20 percent of the Mean Log Deviation measure of inequality. Additionally, sorting on observable characteristics such as age and location (with the higher educated being disproportionally attracted to the metropolitan areas) are also inequality-increasing and sorting on unobservable characteristics that impact on income can play an important role as well.

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