Research

The Chair’s research included policy-focused projects that aimed to show how rigorous public finance research can inform tax and expenditure policy in practice.

Research by the Chair in Public Finance included both traditional academic-focused projects and more policy-focused projects. These projects covered the following topics:

Income inequality and mobility in New Zealand

Summary

This project aimed to identify the extent of income inequality and income mobility among New Zealand taxpayers over several decades, including annual estimates of income inequality since the 1930s. Research was focused on conceptual and empirical linkages between alternative inequality and mobility measures and the roles of taxes, transfers, and other forms of social welfare spending in mitigating or enhancing income mobility and inequality.

Researchers

Nazila Alinaghi, Christopher Ball, John Creedy, and Norman Gemmell

Published papers

Creedy, J., Gemmell, N. and Laws, A. (2021) Relative income dynamics of individuals in New Zealand: new regression estimates. New Zealand Economic Papers, 55, 2, 203-220.

Creedy, J. and Gemmell, N. (2019) Illustrating income mobility: new measures. Oxford Economic Papers, 71, 3, 733-755.

Creedy, J. and Gemmell, N. (2019) Income inequality in New Zealand: why conventional estimates are misleading. Agenda – A Journal of Policy Analysis and Reform, 26, 1, 5-22.

Creedy, J., Gemmell, N. and Nguyen, L. (2018) Income inequality in New Zealand 1935-2014. Australian Economic Review, 51, 1, 21-40.

Creedy, J. and Gemmell, N. (2018) Income dynamics, pro-poor mobility and poverty persistence curves. Economic Record, 94, 306, 316-328.

Aziz, O., Gemmell, N. and Laws, A. (2016) Income and fiscal incidence by age and gender: some evidence from New Zealand. Review of Income and Wealth, 62, 3, 534-558.

Working papers

Creedy, J. (2021) Distributional comparisons using the Gini inequality measure. Working Papers in Public Finance, 08/2021, Wellington School of Business and Government, Victoria University of Wellington.

Creedy, J. (2021) Comparing income distributions using Atkinson’s measure of inequality. Working Papers in Public Finance, 06/2021, Wellington School of Business and Government, Victoria University of Wellington.

Creedy, J. and Gemmell, N. (2021) Illustrating income mobility and poverty persistence. Working Papers in Public Finance, 04/2021, Wellington School of Business and Government, Victoria University of Wellington.

Alinaghi, N., Creedy, J. and Gemmell, N. (2020) A longitudinal database for the analysis of family incomes in New Zealand. Working Papers in Public Finance, 06/2020, Wellington School of Business and Government, Victoria University of Wellington.

Alinaghi, N., Creedy, J. and Gemmell, N. (2020) Constructing a longitudinal database for the analysis of individual incomes in New Zealand. Working Papers in Public Finance, 05/2020, Wellington School of Business and Government, Victoria University of Wellington.

Creedy, J. (2019) The Atkinson inequality measure and inequality aversion. Working Papers in Public Finance, 01/2019, Victoria Business School, Victoria University of Wellington.

Ball, C. (2016) Estimating income dynamics from cross-sectional data using matching techniques. Working Papers in Public Finance, 06/2016, Victoria Business School, Victoria University of Wellington.

Modelling and benchmarking income taxes and transfers in New Zealand

Summary

This project, which began in mid-2016, developed new behavioural microsimulation models of personal income taxes and transfers in New Zealand. These were ‘benchmarked’ internationally by comparing with similar models for Australia and a number of European countries.

The project aimed to improve the evidence base for tax policy advice in practice, and was conducted in collaboration with modellers at the New Zealand Treasury. It was also supported by a three-year Endeavour Fund grant from the Ministry of Business, Innovation and Employment (MBIE).

Current applications of the microsimulation model include examining optimal income tax reforms and the inequality impacts of changes to minimum wage rates versus taxes and transfers. In 2020, tax modelling developments included developing a standalone microsimulation model, TaxSimNZ, based on a new synthetic dataset and hosted at Victoria University of Wellington.

Researchers

Nazila Alinaghi, Chris Ball, John Creedy, Norman Gemmell, Nicolas Hérault, Penny Mok and Matt Nolan

Published papers

Alinaghi, N., Creedy, J. and Gemmell N. (2021) Designing direct tax reforms. Alternative approaches. Australian Economic Review, 54, 4, 445-461.

Alinaghi, N., Creedy, J. and Gemmell, N. (2020) The redistributive effects of a minimum wage increase in New Zealand. Australian Economic Review, 53, 4, 517-538.

Creedy, J., Gemmell, N., Hérault, N. and Mok, P. (2020) Microsimulation analysis of optimal income tax reforms. An application to New Zealand. International Tax and Public Finance, 27, 2, 409-434.

Creedy, J. and Mok, P. (2019) Labour supply elasticities in New Zealand. New Zealand Economic Papers, 53, 2, 125-0143.

Creedy, J. and Mok, P. (2018) The marginal welfare cost of personal income taxation in New Zealand. New Zealand Economics Papers, 52, 3, 323-338.

Creedy, J. and Mok, P. (2017) Labour supply in New Zealand and the 2010 tax and transfer changes. New Zealand Economics Papers, 51, 1, 60-78.

Working papers

Ball, C. and Huseynli, G. (2019) The wage equation estimates for microsimulation modelling in New Zealand: a microsimulation analysis. Working Papers in Public Finance, 04/2019, Victoria Business School, Victoria University of Wellington.

Nolan, M. (2018) Income-leisure preferences in New Zealand: 1988-2013. Working Papers in Public Finance, 09/2018, Victoria Business School, Victoria University of Wellington.

Nolan, M. (2018) New Zealand wage equations: 1988-2013. Working Papers in Public Finance, 05/2018, Victoria Business School, Victoria University of Wellington.

Nolan, M. (2018) Income tax and transfer policy changes in New Zealand: 1988-2013. Working Papers in Public Finance, 02/2018, Victoria Business School, Victoria University of Wellington.

Nolan, M. (2018) Horizontal and vertical equity in the New Zealand tax-transfer system: 1988-2013. Working Papers in Public Finance, 01/2018, Victoria Business School, Victoria University of Wellington.

Behavioural responses to taxation and tax compliance

Summary

Much of this research was based around applications of Feldstein’s (1995) ‘elasticity of taxable income’ (ETI) measure of taxpayer responses to tax rate changes, exploring both conceptual and applied New-Zealand specific aspects.

Recent papers have focused on applying ‘tax kink bunching’ methods to ETI estimation for New Zealand. The research was supported by a three-year Endeavour Fund grant from the Ministry of Business Innovation and employment (MBIE).

Another research stream focused on two main aspects of tax compliance. First, compliance enforcement and penalties: testing for the effects of both actual and perceived penalty rates on New Zealand GST compliance. Second, measuring income gaps for self-employed taxpayers using both survey and administrative (register) data.

Researchers

Nazila Alinaghi, Ana Cabral, John Creedy and Norman Gemmell

Published papers

Alinaghi, N., Creedy, J. and Gemmell, N. (2021) Elasticities of taxable income and adjustment costs: bunching evidence from New Zealand. Oxford Economic Papers, 73, 3, 244–1269.

Alinaghi, N., Cabral, A.C.G and Gemmell, N. (2021) Are survey-based self-employment income under-reporting estimates biased? New evidence from matched register and survey data. International Tax and Public Finance, 28, 2, 284-322.

Creedy, J. and Gemmell, N. (2020) The elasticity of taxable income of individuals in couples. International Tax and Public Finance, 27, 931-950.

Creedy, J., Gemmell, N. and Teng, J. (2018). Income effects and the elasticity of taxable income. New Zealand Economic Papers, 52, 2, 185-203, 185-203.

Gemmell, N. and Ratto, M. (2018) The effects of penalty information on tax compliance: evidence from a New Zealand field experiment. National Tax Journal, 71, 3, 547-588.

Creedy, J., Gemmell, N. and Teng, J. (2018). Income effects and the elasticity of taxable income. New Zealand Economic Papers, 52, 2, 185-203.

Creedy, J. and Gemmell, N. (2017) Measuring revenue-maximising elasticities of taxable income: evidence for the US income tax. Public Finance Review, 45, 2, 174-204.

Carey, S., Creedy, J., Gemmell, N. and Teng, J. (2015) Estimating the elasticity of taxable income in New Zealand. Economic Record, 91, 292, 54-78.

Creedy, J. and Gemmell, N. (2015) Revenue-maximising tax rates and elasticities of taxable income in New Zealand. New Zealand Economic Papers, 49, 2, 189-206.

Gemmell, N. and Hasseldine, J. (2014). Taxpayers' behavioural responses and measures of tax compliance 'gaps': a critique and a new measure. Fiscal Studies, 35, 275–296.

Creedy, J. and Gemmell, N. (2013) Measuring revenue responses to tax rate changes in multi-rate income tax systems: behavioural and structural factors. International Tax and Public Finance, 20, 6, 974-991.

Gemmell, N and Hasseldine, J. (2012) The tax gap: a methodological review. Advances in Taxation, 20, 203-231.

Gemmell, N. and Ratto, M. (2012) Behavioural responses to taxpayer audits: evidence from random enquiries of UK self-assessed taxpayers. National Tax Journal, 65, 33-58.

Working papers

Bell, M. (2021) Golden years – understanding the New Zealand superannuation fund. Working Papers in Public Finance, 07/2021, Victoria School of Business and Government, Victoria University of Wellington.

Alinaghi, N., Creedy, J., and Gemmell, N. (2020) Do couples bunch more? Evidence from single and partnered taxpayers in New Zealand. Working Papers in Public Finance, 02/2020, Victoria School of Business and Government, Victoria University of Wellington.

Gemmell, N. (2020) New Zealand’s tax reforms and tax sheltering behaviour. Working Papers in Public Finance, 03/2020, Victoria School of Business and Government, Victoria University of Wellington.

Measuring research quality in tertiary education

Summary

Extensive previous research by Buckle and Creedy examined the characteristics and outcomes of academic research at New Zealand universities, following the introduction of the Performance Based Research Fund (PBRF) scheme. Using individual-level data, this project looked at how far the PBRF scheme encouraged convergence or divergence in research quality across New Zealand’s universities and academic disciplines between 2003 and 2018.

Researchers

Bob Buckle, John Creedy, and Norman Gemmell

Published papers

Buckle, R., Creedy, J., and Gemmell, N. (2020) Is external research assessment associated with convergence or divergence of research quality across universities and disciplines? Evidence from the PBRF process in New Zealand. Applied Economics, 52, 36, 3919-3932.

Buckle, R. and Creedy, J. (2020) The disciplinary effect of the performance based research fund in New Zealand. New Zealand Economic Papers, 54, 2, 107-126.

Working papers

Buckle, R., Creedy, J., and Gemmell, N. (2021) Sources of convergence in University research quality. Working Papers in Public Finance, 05/2021, Wellington School of Business and Government. Victoria University of Wellington.

Buckle, R., Creedy, J., and Ball, A. (2020) Fifteen years of a PBRFS in New Zealand: incentives and outcomes. Working Papers in Public Finance, 08/2020, Wellington School of Business and Government. Victoria University of Wellington.

Buckle, R., Creedy, J., and Ball, A. (2020) A Schumpeterian gale: using longitudinal data to evaluate responses to performance-based research funding systems. Working Papers in Public Finance, 07/2020, Wellington School of Business and Government. Victoria University of Wellington.

The size and scope of the public sector in New Zealand

Summary

This project began by documenting the changing size and scope of the public sector in New Zealand since the early 20th century, using a variety of metrics to assess government size. Using a public expenditure to GDP ratio metric, the project examined the extent to which short- and long-term changes in size since the 1970s could be explained by existing theories of public expenditure applied to New Zealand.

Researchers

Norman Gemmell, Derek Gill, and Loc Nguyen

Published papers

Gemmell, N., Gill, D., and Nguyen, L. (2019) Modelling public expenditure growth in New Zealand, 1972-2015. New Zealand Economic Papers, 53, 3, 215-244.

Gemmell, N. (2017) Reforms to New Zealand superannuation eligibility: are they a good idea? Policy Quarterly, 13, 2, 35-39.

Gemmell, N. and Gill, D. (2016) The myth of the shrinking state? What does the data show about the size of the state in New Zealand. Policy Quarterly, 12, 3, 3-10.

Public service productivity

Summary

This project reviewed recent evidence on public sector productivity in New Zealand at both the aggregate level and for key sectors, drawing on international literature on concepts, measurement, and evidence.

It developed a principles-based framework for the analysis of public sector productivity with a focus on the micro level, illustrated for public education. The project reviewed existing evidence on productivity in the New Zealand education sector and assessed new approaches to adjusting for quality in measuring education productivity in New Zealand.

Researchers

Norman Gemmell, Patrick Nolan, and Grant Scobie

Published paper

Gemmell, N., Nolan, P., and Scobie, G. (2018) Quality adjusting education sector productivity. Policy Quarterly, 14, 3, 46-51.

Working papers

Gemmell, N., Nolan, P., and Scobie,G. (2017) Estimating quality-adjusted productivity in tertiary education: methods and evidence for New Zealand. Working Papers in Public Finance, 17/2017, Victoria Business School, Victoria University of Wellington.

Gemmell, N., Nolan, P. and Scobie, G. (2017) Public sector productivity: quality adjusting sector-level data on New Zealand schools. New Zealand Productivity Commission Working Paper, 02/2017, May 2017.

Local taxes and Auckland agglomeration

Summary

In 2010, the Auckland super city was formed through the amalgamation of seven local authorities consisting of around 200 suburban entities and towns.

The amalgamation resulted in communities’ using capital values as the basis for local taxation (rates), whereas some communities had previously used land values. The new city also transitioned to a single system of ‘development contributions’ paid by developers.

This project examined how far the changes in the Auckland property tax regime affected the location and intensity of building development. The research was undertaken with the support of Lincoln Institute of Land Policy, Cambridge, Massachusetts, USA, and Motu Economic and Public Policy Research, Wellington, New Zealand.

Researchers

Norman Gemmell, Arthur Grimes, and Mark Skidmore

Published paper

Gemmell, N., Grimes, A. and Skidmore, M. (2019) Do local property taxes affect new building development? Results from a quasi-natural experiment in New Zealand. The Journal of Real Estate Finance and Economics, 58, 2, 310-333.

Working paper

Le, Y., Gemmell, N. and Grimes, A. (2015) The Auckland amalgamation. An inquiry into the impacts of amalgamation, development contributions, and land taxation on the rate and density of new development. Data collection phase final report. Report to the Lincoln Institute of Land Policy, Cambridge MA, USA.

The growth impact of taxes in the OECD

Summary

This research aimed to contribute a range of empirical analyses to measure the contribution of fiscal policy to long-run GDP levels and growth rates. Later papers examined the robustness of fiscal-growth effects to alternative macro- and micro-based tax rate measures; the growth impact of changes in public expenditure composition; and firm-level productivity effects of corporate tax reform.

Researchers

Norman Gemmell, Richard Kneller, Florian Misch, Ismael Sanz, José Sanz-Sanz

    Published papers

    Gemmell, N., Kneller, R., McGowan, D., Sanz, I. and Sanz-Sanz, J. (2018) Corporate taxation and productivity catch-up: evidence from European firms. Scandinavian Journal of Economics, 120, 2, 372-399.

    Gemmell, N., Kneller, R. and Sanz, I. (2016) Does the composition of government expenditure matter for long-run GDP levels? Oxford Bulletin of Economics and Statistics, 78, 522-547.

    Gemmell, N., Kneller, R. and Sanz, I. (2014) The growth effects of tax rates in the OECD. Canadian Journal of Economics, 47, 4, 1217-1255.

    Misch, F., Gemmell, N. and Kneller, R. (2014) Using surveys of business perceptions as a guide to growth-enhancing fiscal reforms. Economics of Transition, 22, 683–4725.

    Gemmell, N., Kneller, R. and Sanz, I. (2013) Fiscal decentralization and economic growth in OECD countries: matching spending with revenue decentralization. Economic Inquiry, 51, 1915–1931.

    Misch, F., Gemmell, N. and Kneller, R. (2013) Growth and welfare maximization in models of public finance and endogenous growth. Journal of Public Economic Theory, 15, 939–967.

    Gemmell, N. and Au, J. (2013) Do smaller governments raise the level or growth of output? A review of recent evidence. Review of Economics, 64, 2, 85–116.

    Gemmell, N., Kneller, R. and Sanz, I. (2011) The timing and persistence of fiscal policy impacts on growth: evidence from OECD countries. Economic Journal, 121, F33–F58.