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©NIDEA 1
Revisiting Income Inequality Between and Within New Zealand’s Regions: Analysis of 1981-2006 Census Data
Omoniyi Alimi
with Dave Maré and Jacques Poot
PANZ Conference Presentation 28th June 2013
Sponsored by MBIE funded Nga Tangata Oho Mairangi (NTOM) project
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Overview
• Introduction
• Data
• Inter-regional Income Distribution
• Intra-regional Income Distribution
• Conclusion
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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
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Introduction
• In New Zealand, protests in 6 cities - Auckland, Wellington, New Plymouth, Christchurch, Invercargill and Dunedin
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• 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
Introduction
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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
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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
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• Fit in Pareto distribution to the upper income bracket to get average income in the top open ended bracket.
Data
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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 Average Income in
1996 Dollars
1981 $34,289
1986 $29,305
1991 $27,519
1996 $30,177
2001 $33,754
2006 $38,303
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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%
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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 :
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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
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Convergence - Including Auckland and Wellington
y = -0.1322x + 1.375 R² = 0.0069
-30%
-20%
-10%
0%
10%
20%
30%
40%
10.25 10.3 10.35 10.4 10.45 10.5 10.55 10.6 10.65
Gro
wth
rat
e 1
98
1-2
00
6
Log of 1981
Southland
Auckland Wellington
Nelson
West Coast
Tasman Canterbury
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y = -0.6847x + 7.0794 R² = 0.481
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
10.25 10.3 10.35 10.4 10.45 10.5 10.55 10.6 10.65
Convergence - excluding Auckland and Wellington
Gisborne
Southland
Nelson
West Coast
Tasman Canterbury
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Intra-regional Distribution - Gini coefficients
0.2
.4.6
.81
cum
y_
inc13
0 .2 .4 .6 .8 1fy_inc13
A
B
Gini = area A / (area A + area B)
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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
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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.
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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.
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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%
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• Gains in income across the distribution between 1996 and 2006
• Convergence of the gini coefficients across regions between 1981 and 2006
Conclusion
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Convergence of Gini Coefficients
y = -3.8213x + 1.5476 R² = 0.5207
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
0.34 0.35 0.36 0.37 0.38 0.39 0.4 0.41 0.42
Wellington
West Coast Canterbury
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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-Wanganui
$ 26,983 Tasman $ 31,036
Northland $ 31,371 Otago $ 26,648 Otago $ 30,615
Marlborough $ 31,300 Gisborne $ 26,075 Manawatu-
Wanganui
$ 30,011
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
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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
Southland 1.83 1.82
Tasman 1.8 1.9
Nelson 1.6 2.1
Marlborough 1.6 1.9
National 1.6 2.5
Palma
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1981 2006 growth. rates Northland Region 31371.5 29439.04 -6% Auckland Region 34019.71 44892.05 28%
Waikato Region 35768.08 34788.52 -3% Bay Of Plenty Region 34158.64 32877.02 -4% Gisborne Region 32373.66 28557.77 -13% Hawke's Bay Region 34055.4 31617.53 -7% Taranaki Region 34176.95 34889.81 2% Manawatu-Wanganui Region 33296.68 30011.29 -10% Wellington Region 37452.32 49704.85 28% West Coast Region 29457.21 28833.01 -2% Canterbury Region 32840.4 33920.18 3% Otago Region 32949.58 30615.05 -7% Southland Region 40246.6 31620.54 -24% Tasman Region 29436.28 31035.53 5% Nelson Region 30214.96 32295.47 7% Marlborough Region 31299.96 31567.82 1%
Growth rates
