How did the wealthiest New Zealanders get so rich?

Abstract

It has been found that, in Australia, the United States and Great Britain, about two‐thirds of large personal fortunes originated in industries which economists would judge to be “competitive “, in the sense that entry and exit is easy so that marginal firms are not expected to earn above‐normal profits. The possible explanations for this striking phenomenon are (a) returns to risk, (b) disequilibrium, and (c) inframarginal rents. This paper replicates the earlier analyses for New Zealand, using fortunes identified on the National Business Review's annual “Rich List” as the basis for the database. Seventy‐nine per cent of New Zealand fortunes originated in industries judged to be competitive. The rate of new fortune accumulation has been steady since the Second World War. The most likely sectors for fortunes to appear in are manufacturing, and the “deal‐making” industries (merchant banking, brokerage, insurance, real estate and property development). Nearly three‐quarters of the fortunes were self‐made. The proportion earned by first‐generation immigrants just about exactly matches the proportion of such people in the general population (unlike the case in Australia).