31 May 2009

New Zealand's economic growth held back by distance from major markets

A 2008 Organisation for Economic Co-operation and Development (OECD) working paper, The Contribution of Economic Geography to GDP per Capita by Hervé Boulhol, Alain de Serres and Margit Molnar, includes econometric analysis that suggests New Zealand and Australia's economic (GDP per capita) growth over the five years 2000-2004 was over 10% less than it might otherwise have been relative to the OECD average because of lower access to markets. Belgium and the Netherlands, on the other hand benefited some 6-7% as a consequence of their favourable location.

This analysis has been picked up in the summary of the OECD's 2009 Economic Survey of New Zealand which describes the country as "... a small nation on the world’s periphery ..." and having a "... geographic handicap ..." The Survey summary comments that "The small size and remoteness of the economy diminish its access to world markets, the scale and efficiency of domestic businesses, the level of competition and proximity to the world’s technology frontier."

Even before the sharp rise in oil prices last year and signs of protectionism resurfacing with the global economic recession, distance and remoteness do not seem to have died with globalisation (see previous post).

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