DESCRIPTIONS AND ANALYSIS OF CHANGES IN REGIONAL INCOMES DISTRIBUTIONS IN NEW ZEALAND 1981-2001: CONVERGENCE OR DIVERGENCE?

Özer KARAGEDİKLİ (Reserve Bank of New Zealand)
Dave MARÉ (Motu Economic & Public Policy Research)
Jacques POOT (Victoria University of Wellington)

Among developed economies, New Zealand is one of the countries that experienced a large increase in personal income inequality since the economy wide reforms started in the mid 1980s. This paper focuses on income inequality at the regional level during the period 1981 until 2001. Excluding the metropolitan regions Auckland and Wellington, real mean incomes converged across the regions (and declined for males). Regional Gini coefficients were higher in 1996 than in 1981 for males, but lower for females. However, women experienced an increase in inequality during the second half of the economic reform decade (1986-1996), while men experienced the greatest increase during the first half. Using year/gender/region-specific grouped data on the income distribution, we show by means of simple regression models that labour market characteristics, such as sectoral composition and ethnic composition of the labour force, have an impact on the income distribution. However, these regression models provide very little explanatory power in the case of the female income distribution. Using a simple Granger causality test, we also focus on the interaction between income inequality and economic growth at the regional level. We find a two-way positive interaction between these two variables.