Closing the deal: politics and economics of tenure review

Abstract

Until 1992, land on the eastern slopes of New Zealand’s South Island was owned by the Crown and leased for pastoral sheep grazing. This land in Crown pastoral leases comprised 20% of the South Island, or 10% of NZ’s landmass. Since 1992, the pastoral leaseholders have been able to enter negotiations with the Crown to split the leased land – land below 1000m is privatised, whilst land with conservation values (usually above 1000m) shifts into public conservation land. The papers I will present use the theories of rents, bargaining, administrative politics, and public choice to examine financial outcomes from New Zealand land reform. Results are inconsistent with payments arising from a bargain in which both the Crown and lessee advocate to their full potential, and are instead consistent with the Crown backing down to lessees’ desires for a generous deal. This back-down stems either from 'bureaucratic coping', or from the addition of a bureaucratic middleman between the Crown principal and its negotiator subagent, exacerbating the principal-agent problem.