Economic adjustment in New Zealand : a developed country case study of policies and problems

Abstract

New Zealand serves as a good case study of the processes of economic adjustment for a number of reasons. Its economic structure has strong similarities with both the developed and less developed country groupings: it is a small relatively open economy with a large export oriented agricultural sector like many less developed countries, but with a relatively high income level. New Zealand has followed an import substitution and generally interventionist economic strategy of greater intensity than most other high income countries. Furthermore, New Zealand is an island state with high transport costs to and from overseas markets. Government planning and intervention have played a major role in New Zealand's development. The paper documents the changing economic performance in relation to some aspects of changes in Government intervention in trade policy, tax expenditures, production subsidies and regulations. This work consists of a synthesis of past empirical studies with new estimates of direct export assistance, tax expenditures and a recent assessment of import protection. The second aspect of the paper is to assess the impact of the development strategy on growth and employment.