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November 18, 2021

How will Construction 4.0 benefit the economy?

Exploring the impact of new technology

Heavy Engineering Research Association (HERA) is a foundation with a vision to secure tomorrow’s industry by innovating today. We have collaborated with HERA on a number of projects in the last few years, particularly in evaluating the impact HERA has in terms of economic and other types of wellbeing.

Earlier this year HERA approached us with a “what if” question: what if the construction industry adopted Industry 4.0 technologies?

To answer this we decided that Construction 4.0 technology and approaches are nebulous and includes Business Information systems, Just In Time decision making tools, and other communications technologies. The next question was what impact would these have. If a business invests in a new technology they would only do so if it is profitable. For an economist, if investment is profitable that means that it must have been productive. We created three scenarios describing a range of changes to productivity growth in the construction industry.

We then fed these scenarios into our Computable General Equilibrium model of the New Zealand economy. This model is a (large) set of simultaneous equations that can be solved under a set of assumptions. The general idea is that we incorporate all the complexity of the real economy in the simplest way possible.

Our results show that, following the adoption of Construction 4.0 technologies, Real GDP could be increased by up to $8 billion over the next five years. Our results also show that the gains will be felt most by middle income households. They also show that the benefits would filter through to almost every industry in the economy.

Our full report is available through HERA on their website and in New Zealand Engineering News.