Who benefits from increases to government allowances? : evaluating the impact of a policy change in New Zealand : a research thesis in partial fulfillment of the requirements for the degree of Master of Business Studies - Economics at Massey University, Palmerston North, New Zealand

Abstract

This thesis investigates a natural experiment created by a 2018 policy change to New Zealand’s Student Loan Living Costs, Student Allowance and Accommodation Benefit to estimate whether this policy has raised rents. Using data sourced from Statistics New Zealand, I estimate that the average support students received in the one year following the policy change increased on average $66 per week and find a positive effect on weekly rents in Palmerston North, Wellington, and Dunedin. This paper also finds a significant announcement effect for the one year following the policy’s announcement on 21 November 2017. The policy effect was concentrated in Wellington, and I find a large significant positive effect in 5+ bedroom dwellings across all three cities. The results estimate that the marginal propensity to spend on housing is about 0.33 and elasticity of housing expenditure with respect to income about 0.14. Overall, the results suggest that recipients benefited between 63-100% of the increase in weekly payments in the form of higher disposable income after housing costs.