Those interested in the New Zealand Economic Experiment may be
interested in a brief paper by Paul Dalziel, Reader in Economics,
Department of Economics and Marketing, Lincoln University.
I reproduce its abstract and conclusion below. Paul has not yet had
it accepted for publication, but is happy for it to be distributed
and is interested in comments, so I can send a Word 6 version to
those who are interested.
Bill Rosenberg
Abstract:
Evans, Grimes and Wilkinson's (1996) essay on New Zealand's economic
reforms claims that real per capita income has risen above its pre-
reform trend, overseas debt has fallen, and the number of households
experiencing poverty is no greater than before the reform program.
This communication documents that the data producing these claims are
not reliable. Instead, there is still no clear-cut measured
improvement in New Zealand's growth performance, overseas debt was
significantly higher in 1995 than in 1984, and substantial income
sacrifices between 1988 and 1993 doubled the number of households in
poverty.
Conclusion:
New Zealand's program of economic reforms continues to attract
international attention, and EGW's article is likely to be widely
cited. Using official and public data sets, however, the previous
three sections allow the following statements to be made in contrast
to the claims of EGW.
1. Using an absolute poverty standard, the number of households
below the poverty line increased from 4.3 percent in 1984 to 10.8
percent in 1993.
2. Between March 1984 and March 1995, New Zealand's total overseas
debt rose by almost 30 percentage points of GDP.
3. New Zealand's real per capita output (based on working age
population) in the year ending March 1995 was still 1.3 percent below
the level that would have resulted had the economy continued to grow
at the peak-to-peak trend rate of 0.795 percent per annum between
1966/67 and 1981/82.
4. The income sacrificed between 1987/88 and 1993/94 as a result of
real per capita output being below its pre-reform trend was $11,500
per working age person (in 1991/92 prices), or 32 percent of annual
GDP.
These figures indicate why many economists in New Zealand remain
cautious in our evaluation of the reforms. The program's close
adherence to economic theory should have raised the economy's long-
term potential. Nevertheless, the output sacrificed and the poverty
created during the transition phase of the program were substantial,
and it is still not possible to demonstrate a clear-cut improvement
in measured growth performance thirteen years after the reforms began.
/-------------------------------------------------------------------------\
| Bill Rosenberg, Acting Director, Centre for Computing and Biometrics, |
| P. O. Box 84, Lincoln University, Canterbury, New Zealand. |
| [EMAIL PROTECTED] Phone:(64)(03)3252-811 Fax:(64)(03)3253-865 |
\-------------------------------------------------------------------------/
