New Zealand's economic reforms and changes in production structure

Abstract

New Zealand’s reforms beginning in 1984 markedly improved the country’s economic prospects. They were one of the most radical and comprehensive programmes of structural change among countries in the Organisation for Economic Co‐operation and Development (OECD). This paper examines how New Zealand’s production structure was transformed using input output analysis. The results show that the reforms rapidly affected the economy and industries were subject to large structural change. Trade liberalisation was a central aspect of the reforms and has had dramatic effects on some industries.

Keywords:

• economic reform
• production structure
• structural change
• input output models

JEL classification:

• C67
• L16

Acknowledgements

Special thanks are due to Barry Voice. I thank Bob Buckle, Edda Claus, John Creedy, Brian Easton, Viv Hall, Dean Hyslop, Ralph Lattimore, Grant Scobie and Adolf Stroombergen for valuable suggestions. I have also benefited from comments by participants at a Treasury seminar and a New Zealand Econometric Study Group Meeting. I would like to thank Kathy Li for research assistance. The views expressed in this paper are my own.

Notes

1. Buckle et al. (2003) examine the decline in the variance of New Zealand’s real gross domestic product since the mid‐1980s, while Hyslop and Maré (2005) investigate New Zealand’s changing income distribution.

2. Price deflators are not available for the earlier tables and no adjustment can be made for inflation. However, comparing industries at different points in time should limit the impact of abstracting from inflation.

3. The import content can be measured by the cumulated primary input coefficient. Results are available on request.

4. The 1971–72 data do not distinguish between subsidies and non‐commodity subsidies. Subsidies for 1971–72 are therefore excluded from value added.

5. The small decline between 1981–82 and 1986–87 may have been the result of a wage freeze during the first half of the 1980s.

6. The results are available on request from the author.

7. The changing importance of industries in terms of employment can be measured by the compensation of employees multiplier. Results are available on request.