The New Zealand pastoral livestock sector : a preliminary econometric model

Abstract

This paper reports on an investigation of the pastoral livestock sector of New Zealand. The sector's recent history, and also New Zealand's, has been one of slow, and sometimes negative growth. As a result of the sector's importance, government intervention, in the interests of the country as a whole, has been widespread. This intervention has, however,been largely uncoordinated. A need is seen for the development of a formal model of the pastoral livestock sector. Such a model would both monitor the sector's performance and provide guidelines for intervention by Government. An econometric model is seen as a valuable aid in describing the sector's structure explicitly, predicting the future implications of current trends, and exploring the effects of alternative policies. Section 1 backgrounds the pastoral livestock sector and identifies, in the light of national objectives, the problems it faces in contributing to national prosperity. It concludes with a discussion of how an econometric model will aid the investigation and solution of some of the pastoral sector's problems. Section 2 develops a theoretical model of the pastoral sector which will be useful in analysing the problems described in Section 1. Section 3 presents and discusses the results of estimated model equations and the final section presents the results from a validation exercise. It should be noted that this report is of a preliminary nature and merely reports on the first round of estimation for the model. The results generated, however, suggest that the model has provided a reasonable estimate of the structure of the sector and that further research is needed.