It is a question worth asking and thinking about
Here is¬†a new study from the New Zealand Productivity Commission, and here is the basic puzzle:
Based on its policy settings, the authors estimate that New Zealand‚Äôs GDP per capita should be 20% above the OECD average. But it is actually over 20% below average, making New Zealand a clear outlier. The size of the gap indicates an apparent ‚Äúproductivity paradox‚ÄĚ that costs more than 40 cents in every dollar of output.
Here is one problem:
The increasing importance of global value chains ‚Äď where production activities are spread across countries ‚Äď may have worsened the impact of New Zealand‚Äôs geographic isolation on trade in goods.¬† Because global value chains typically require intensive interaction and just-in-time delivery, they tend to be regionally based. For New Zealand, international transportation costs for goods are about twice as high as in Europe. This reduces access to large markets and the scope for participation in global value chains , where the transfer of advanced technologies now often occurs.
More generally, the ‚Äúgravity equation‚ÄĚ ‚ÄĒ also known as¬†distance¬†‚ÄĒ makes it harder for New Zealand to trade with the rest of the world.