4.2  Spatially targeted policies

Central government can contribute to regional development by facilitating local interests working together and by ensuring national policy is being implemented effectively at the local level. Better co-ordination, facilitation and provision of information are sensible, low-cost ways of helping regions to identify their potential areas of economic development and do something positive to develop them.

Beyond this, the Government should be cautious in promoting regional or place-based policies. The strongest case for place-based policies is when they are targeted to those situations where neighbourhood effects and spillovers are greatest. In the absence of neighbourhood effects, targeting people is likely to be more effective than targeting places. Place based policies need to be selective.

The following provides some touchstones for thinking about spatially targeted regional policy from an inclusive economy perspective. They are intended as general principles– further work is required if more specific policy guidelines are to be developed.

4.2.1 Education is key

In terms of policies that target deprived areas, focusing on education is of key importance. Firstly, it has the direct effect of raising earnings prospects for those in the area. Secondly, improving the quality of schooling is probably the best way to address neighbourhood effects[19] – better local schools promote positive spillovers, attract or retain higher well-being families to the area, and improve social capability. A promising current initiative is a partnership project between schools, families and local communities in two South Auckland neighbourhoods. The “Strengthening Education in Mangere and Otara” (SEMO) initiative focuses on effective strategies to assist children to reach national standards of achievement[20].

Education is also important for isolated deprived regions; by providing people with skills, it can raise the capability of an area and also facilitate people moving to jobs in high growth areas. As in deprived city neighbourhoods, investment in the quality of governance and leadership of local schools, and particularly the school-parent partnership, is likely to be important. Possible types of initiatives include parenting classes, rotating high-quality teachers in for short periods, and additional support and training for board members in low well-being neighbourhoods. Other potentially important policy areas include skill-training, job-search assistance, and making the teaching and research of tertiary institutions located in the regions more responsive to the needs of their local economies.

4.2.2 Connectedness matters

The inclusive economy perspective has emphasised the importance of social and informational networks for building social capability and enhancing productive capacity. Building connections between deprived areas and wider New Zealand society may help address neighbourhood effects, by exposing deprived individuals to more positive interactions and encouraging beneficial spillovers. After education, helping people in deprived areas to connect is likely to be the next most sensible role for government.

Central government’s role in infrastructure decisions and investments has a clear impact on the connectedness of regions. Maintaining or further developing the road, rail and port infrastructure in isolated regions has received particular attention of late with respect to the East Cape and Gisborne areas – such infrastructure may help to attract mobile industries to these areas. Conversely, infrastructure pressures in Auckland also have a high profile – improvements in road and rail networks may help generate greater benefits of agglomeration and ease dispersion pressures. Decisions on infrastructure investment are complex and involve major fiscal commitments. Policy makers need to assess particularly carefully the cost-benefit rationale for allocating resources and consider whether those who gain, and who are in a position to pay, should do so.

Promoting social connectedness through enabling access to the internet has been a priority for the East Cape. In all regions, access by individuals in isolated rural communities to telephone services has also been identified as an issue. Furthermore, a common complaint that has emerged from regional fora is the lack of face-to-face (Maori use the term ‘kanohi ki te kanohi’) communication between local interests and government.[21] The Heartland Services Initiative may go some way to addressing this.

4.2.3 People need to be able to move

High adjustment costs were identified earlier in the paper as a potential rationale for government action. For this reason enhancing choices by facilitating mobility in deprived regions is important – policy should focus on initiatives such as job-search assistance, and relocation assistance for those who would like to move but face barriers to doing so. These policies have the double benefit of helping people in deprived regions get jobs, and helping employers in growing regions fill vacancies.

The downside is that outcomes may be even worse for those left behind as a result of the loss of social capability. Here, it is important to think about policies that might improve the prospects for those left behind. High quality local schools, for example, will raise the capability of the remaining community and may also attract skilled people to the region. Trying to restrict or distort mobility in any way, however, is inadvisable, given the importance of growth in an inclusive economy.

4.2.4 Intervention in local economies needs to be selective

Finding ways to improve community functioning through interventions at a local level is key. Local government in particular has an important role here, although central government, as a broker of relationships, may also be able to make a significant contribution in rebuilding local social capability. Better co-ordination, facilitation and provision of information are sensible, low cost ways of helping regions to identify their potential areas of economic development and do something positive to develop them. Strategic partnerships and joint ventures can help to develop networks for transmitting important tacit knowledge. The Regional Taskforce initiative involves activities to stimulate regional partnerships between local government, business, community and Maori groups. For the Tairawhiti/East Cape region the involvement of senior political representation has proved significant in brokering relationships between interests that historically have not worked together. In other regions such as Northland, such links have been active for many years and the role that the government has taken is one of support to build upon existing relationships.

Coordinating the direction of effort of local interests is likely to be an effective, low–cost intervention. However, other interventions in local communities and economies involve significant costs. Large scale expenditure by central government to selected recipient regions is likely to involve significant costs to contributing regions and is unlikely to have benefits outweighing their costs to the wider economy. Place-based policies need to be selective and focus on areas where there are large and significant spillovers. As discussed earlier, Auckland is an important source of growth for New Zealand, a source that competes with other urban agglomerations, notably Sydney, in providing residence for workers and firms. One of the costs of assisting struggling non-urban regions may be that it promotes overseas cities at the expense of Auckland.

4.2.5 Evaluation is important.

The best mix of policy levers to achieve spatial policy goals will only become clear as a result of careful evaluation of current policies. Such evaluation ought to be a key component of any people or place-based interventions. Where knowledge of what works is lacking, the prudent approach before committing large sums is to conduct small-scale pilots and evaluate their value for money. Our broader inclusive economy work identifies the need across a range of areas to improve understanding of the effects of government policies. Improving the evidence base for spatial policy is no exception.

5.  Conclusion

In summary, the key ideas arising from the paper are:

• We need to be clear when considering regional differences whether we are interested in numbers, proportions, persistence or relative decline.
• Auckland is important: it contains the largest number of deprived neighbourhoods, its proportion of deprived neighbourhoods is growing, cities are fundamental for growth, and there are likely negative ‘neighbourhood effects’ in South Auckland.
• Rural deprived regions, particularly Northland and Gisborne, may be important if people are stuck and/or community functioning is impaired.
• Maori are particularly affected by deprivation, both relatively and absolutely, though the analysis in this paper does not take account of differences between ethnic groups in other factors likely to lead to deprivation differences between them.
• Pacific peoples fare worse than Maori in many regions, and are particularly deprived in Auckland and Wellington.
• There is a regional dimension to ethnic outcomes and an ethnic dimension to regional outcomes but solving one problem will not completely solve the other.

Looking at regional differences from an inclusive economy perspective generates avenues for policy exploration. Education appears to be a key policy lever in addressing both ‘neighbourhood effects’ and ability to move to areas of opportunity. Connectedness, physical, social and intellectual, is also important for building social capability. Facilitating mobility in deprived regions is crucial in helping people and regions adjust. Place-based policies need to be selective – the costs of assisting struggling non-urban regions are borne by those regions that are not assisted. Finally evaluation is critical for better regional policy design.

Good policy must be based on good information. Particular areas for further work include adding housing costs to our regional database to allow us to better investigate the links between income and well-being and looking further at internal mobility to improve our understanding about the patterns of movement in New Zealand and the ways regions adjust. Non-spatial policies can have a spatial impact – further analysis is also required to better understand the effects of particular policies.

References

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Bushnell, P. and W. K. Choy (2001) “Go West, Young Man, Go West?” Treasury Working Paper 01/07, http://www.treasury.govt.nz/publications/research-policy/wp/2001/01-07.

Ciccone, A. and R. E. Hall (1996) “Productivity and the Density of Economic Activity”, American Economic Review, 86(1), pp 54-70.

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Maré, D., and W. K. Choy (2001) “Regional Labour Market Adjustment and the Movements of People: A Review”, Treasury Working Paper 01/08, http://www.treasury.govt.nz/publications/research-policy/wp/2001/01-08.

Maré, D., P. Mawson and J. Timmins (2001), “Deprivation in New Zealand: Regional Patterns and Changes”, Treasury Working Paper 01/09, http://www.treasury.govt.nz/publications/research-policy/wp/2001/01-09.

O’Dea, D. (2000) “The Changes in New Zealand’s Income Distribution”, Treasury Working Paper 00/13, http://www.treasury.govt.nz/publications/research-policy/wp/2000/00-13.

Robinson, V., H. Timperley and T. Bullard (2000), “Strengthening Education in Mangere and Otara Evaluation: Second Evaluation Report”, Report to the Ministry of Education, November.

Salmond, C., P. Crampton, and F. Sutton (1998), NZDep96 Index of Deprivation, Health Services Research Centre, Victoria University of Wellington, June.