Completely fair point – however, this is an issue that should have been covered in the NZIER report during the initial research methinks.

“Australia’s income distribution is less unequal IIRC.”

Indeed it is – which should actually make it spin the other way. A very interesting fact.

“And comparing median income just tells you how much richer one person in Australia is than one person in New Zealand, so hardly very descriptive either”

But it should help compensate for the differences in the income distribution – ultimately I would have preferred research that at least attempted comparing like for like before making policy conclusions.

Ultimately, I took issue with the fact that NZIER took GDP per capita as a given income measure, and then went on discussing “income-gaps” in the knowledge of these technical issues associated with using that measure.

If they can show the same thing with average median household wage I’d be more interested – if they can then go on and show that wage gaps exist in certain industries I would be even more interested (I have actually seen this sort of work from them before – which was part of the reason I was disappointed with this).

This release was supposed to be “public good work” – it was supposed to add to the body of intellectual capital in the country. I just don’t think it stood up to those standards.

Note: I am not saying that NZ is not significantly poorer than Aussie – I am just saying that this study wasn’t a very good way of analysing any such discrepancy.

Given Australia’s lower employment rate, their output per worker is even higher than GDP per capita comparison would suggest.

Indeed I agree we are constantly moving, mainly because the steady state is always moving – overall though the steady state is a magnet be are being pulled towards.

An interesting question is “what moves the steady state” – fundamentally technology and institutional issues have to play a large role in this I would suspect – and this movement in the steady state is what truly drives growth.

Here’s a question for you then: do you seriously think we’re ever in steady state or even close thereto? I tend to think it an ever-moving target.

But in the steady state the MPK must be equal between the countries – which implies that this effect is only transitory doesn’t it? It explains why total production is higher in one country, sure – but it does not tell us that growth in one country will exceed the other once this higher production level is reached. This relies in overall growth in productivity, which is effectively a random walk with a trend.

However, I think we are in agreement that if two countries have different resource endowments, GDP per capita will differ (stemming from your discussion of “ex-ante” MPK) – even in the absence of policy failure. As a result, looking at international comparisons of GDP per capita as an objective measure relative living standards in countries is a dodgy way of discussing the success/or requirement of further policy.

However, unless one of us is stating that the MPK is a function of a countries GDP per capita, how does this relate back to whether a country with a higher average income, but the same median income as another country has a higher rate of growth – it definitely has a level of activity, I’m just can’t understand the growth rate argument yet 🙂