PANZ Conference Presentation 28th June 2013
Revisiting Income Inequality Between and Within New
Zealand’s Regions: Analysis of 1981-2006 Census Data
Omoniyi Alimi
with Dave Maré and Jacques Poot
Sponsored by MBIE funded Nga Tangata Oho Mairangi (NTOM) project
©NIDEA
1
Overview
•
•
•
•
•
©NIDEA
Introduction
Data
Inter-regional Income Distribution
Intra-regional Income Distribution
Conclusion
2
Introduction
•
The distribution of personal income has always been an
important issue worldwide
•
The Occupy Movements of 2011-2012 included among
many other things concerns about growing inequality in
the distribution of income
©NIDEA
3
Introduction
• In New Zealand, protests in 6
cities - Auckland, Wellington,
New Plymouth, Christchurch,
Invercargill and Dunedin
©NIDEA
4
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 1981-1996
•
Spatial dimension of income distribution is important too
©NIDEA
5
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
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
Data
• Fit in Pareto distribution to the upper income
bracket to get average income in the top open
ended bracket.
©NIDEA
8
©NIDEA
9
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
©NIDEA
10
Year
Average Income in
1996 Dollars
1981
$34,289
1986
$29,305
1991
$27,519
1996
$30,177
2001
$33,754
2006
$38,303
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 2006.
• 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
©NIDEA
12
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
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 -0.68 and a t statistic
of -3.33.
• Divide between metropolitan areas of Wellington and
Auckland and the rest of New Zealand
©NIDEA
14
Convergence - Including Auckland and Wellington
40%
30%
Wellington
Auckland
Growth rate 1981-2006
20%
10%
Nelson
Tasman
0%
10.25
Canterbury
10.3
West Coast
10.35
10.4
10.45
-10%
10.5
10.55
10.6
y = -0.1322x + 1.375
R² = 0.0069
-20%
Southland
-30%
©NIDEA
Log of 1981
15
10.65
Convergence - excluding Auckland and Wellington
10%
Nelson
5%
Canterbury
Tasman
0%
10.25
-5%
10.3
10.35
10.4
10.45
10.5
10.55
10.6
West Coast
-10%
-15%
Gisborne
y = -0.6847x + 7.0794
R² = 0.481
-20%
-25%
Southland
-30%
©NIDEA
16
10.65
.6
.4
A
.2
cumy_inc13
.8
1
Intra-regional Distribution - Gini coefficients
0
B
0
.2
.4
.6
.8
1
fy_inc13
Gini = area A / (area A + area B)
©NIDEA
17
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
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 2006.
©NIDEA
19
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
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
Conclusion
• Gains in income across the distribution between 1996
and 2006
• Convergence of the gini coefficients across regions
between 1981 and 2006
©NIDEA
22
Thank you for listening
• Contact : [email protected]
©NIDEA
23
Convergence of Gini Coefficients
45%
40%
35%
Wellington
30%
25%
20%
15%
10%
Canterbury
West Coast
5%
y = -3.8213x + 1.5476
R² = 0.5207
0%
0.34
0.35
0.36
0.37
0.38
-5%
©NIDEA
24
0.39
0.4
0.41
0.42
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
$
26,983
Tasman
$
31,036
Northland
$
31,371
ManawatuWanganui
Otago
$
26,648
Otago
$
30,615
Marlborough
$
31,300
Gisborne
$
26,075
$
30,011
Nelson
$
30,215
Marlborough
$
25,594
ManawatuWanganui
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
Palma
Palma 1981
Palma 2006
Northland
2.0
2.2
Auckland
1.5
1.8
Waikato
1.6
2.2
Bay Of Plenty
1.6
2.2
Gisborne
1.9
2.2
Hawke's Bay
1.7
2.1
Taranaki
1.6
2.3
Manawatu-Wanganui
1.7
1.8
Wellington
1.4
3.3
West Coast
1.4
1.9
Canterbury
1.5
2.2
Otago
1.8
2.3
1.83
1.82
Tasman
1.8
1.9
Nelson
1.6
2.1
Marlborough
1.6
1.9
National
1.6
2.5
Southland
©NIDEA
26
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
1981
31371.5
34019.71
35768.08
34158.64
32373.66
34055.4
34176.95
33296.68
37452.32
29457.21
32840.4
32949.58
40246.6
29436.28
30214.96
31299.96
27
2006
29439.04
44892.05
34788.52
32877.02
28557.77
31617.53
34889.81
30011.29
49704.85
28833.01
33920.18
30615.05
31620.54
31035.53
32295.47
31567.82
growth. rates
-6%
28%
-3%
-4%
-13%
-7%
2%
-10%
28%
-2%
3%
-7%
-24%
5%
7%
1%