2001 Conference - Rotorua

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Measuring Progress in New Zealand's Regional Economies

Regional Economic Impact Modelling and the Importance of Measuring Progress: How Do We Know We Are Moving Forward?

Dr Warren R. Hughes
Associate Professor, Economics
Waikato Management School

Contents

• Abstract
• What Propelled New York's Growth...
• ...And What Didn't
• Sector/Industries
• Tauranga D.C.
• Western Bay of Plenty D.C

Abstract

A regional economy is similar to a national economy. The best measure of economic progress by a region is regional GDP or Gross Regional Product (GRP). Many of New Zealand's rural regional rely on primary production as their main wealth generator. Such regions are dependent upon world commodity prices and the value of the New Zealand dollar. That is, year-to-year wealth changes for the region often result from price and dollar movements outside New Zealand's control.

Regular annual GRP measurement is difficult for regions but can be proxied by sector employment measured as at February every year by Statistics New Zealand. It is usually obvious which sectors are important for a given region. However, newer industries such as tourism affect many sectors. Regions fostering tourism need to support the infrastructure across many sectors to achieve growth in this activity

A major factor in charting economic progress within a region is an economic model of the region in question. Such models can be used to derive objective measures of progress. These models can identify the most valuable sectors for a regional economy using measures such as value added per employee. The sum of value added for all sectors in a regional economy add up to regional GRP.

Value added for a sector must cover at a minimum:

• the gross wages and salaries of all workers in that sector
• the replacement of plant and equipment used up in producing total sector output
• the on-going financing of sector business paid to equity and debt holders

In addition to the above minimum, all business taxes including income/company tax and GST need to be covered, assuming profits are made in the case of income tax. Net retained earnings are the residual value added that can be used to expand future activities in the sector.

What Propelled New York's Growth...

...And What Didn't

Data: Bureau of Labor Statistics
Business Week 22 October 2001

Sector/Industries

Tauranga D.C.

Western Bay of Plenty D.C

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