Income Inequality in Australia in an International Comparative Perspective

Earlier comparative work on income distribution has tended to suggest that Australia is characterised by less income inequality than other industrialised economies. Concerns about the quality of the Australian data used in such comparisons have led to the need for more detailed assessment of the situation. The Luxembourg Income Study has been a focus for this work by bringing together microdata sets for a range of countries and reorganising them to conform to standardised concepts and definitions. This paper builds on earlier work undertaken as part of the Luxembourg Income Study by including Australia in an international comparative analysis of income distribution and redistribution. The Australian data are those from the 1981–82 Income and Housing Survey, with income tax imputed onto the data file. Results are presented for the gross and net income distributions between both families and individuals in seven countries. A common set of equivalence scales is also used to adjust for differing family needs. The results indicate that, using several summary measures of inequality, the distribution of income in Australia is less equal than in four of the other six countries studied. Earlier research which placed Australia high on the international league table of income equality is thus not confirmed by the results.     

Australia, Japan and the OECD: GDP Rankings and Revealed Preference

Data on volumes and prices of consumption and investment are used to compare Australian real GDP for 1990 with the other OECD countries. Australian consumption patterns, including leisure, and price structure are very different from most other countries and especially from those of Japan. The Australian bundle of consumption, investment and leisure is revealed preferred to that of Japan and a number of other countries which are conventionally ranked above Australia in comparisons of real GDP per capita at international prices.     

Empirical studies of trade marks – The existing economic literature

This paper surveys empirical studies employing trade mark data that exist in the economic literature to date. In the introductory section we summarise the theory of trade marks. Section 2 documents the use of trade marks by firms of different size and industry and by firms in several advanced countries, including Australia, the UK, and the USA. Section 3 reviews various attempts to gauge the function of a trade mark as an indicator of innovation and product differentiation. Section 4 surveys studies that have demonstrated firms' incentives to use trade marks, including transferring information to consumers, realising synergies between different types of intellectual property rights, strategies to raise rivals' costs and using trade mark portfolios as debt collateral. In Section 5, we provide an overview of the importance of trade-mark-use for firm survival and the association of trade marks with several dimensions of firm performance, including productivity and their ability to generate well-paid jobs.     

The private nonprofit provision of education: A theoretical model and application to Japan

Why do some countries provide education and other quasi-public goods through government production while others rely heavily on the private sector?. When private provision is used, why does the nonprofit organization (NPO) often prevail over the for-profit form? Why do nonprofits concentrate on the provision of quasi-public human capital-enhancing goods, such as education and health care? This paper examines these interrelated questions. Section 2 argues that the relative size of the private (nonprofit) sector is determined by excess demand and differentiated demand for quasi-public goods and by the supply of religious entrepreneurship in the society and industry under examination. Section 3 applies this theoretical model to the case of Japan.     

INFLATION,INFLATION ACCOUNTING AND ITS EFFECT,CANADIAN MANUFACTURING, 1966–82*

This paper provides estimates of the effects of inflation in Canada on the reported rate of return in manufacturing from 1966 to 1982. It provides estimates for several different concepts of rate of return (both for all assets, whether financed by equity or debt, and for the narrower equity to the owners) and for both a narrow and wide range of financial assets. Comparisons are made with similar studies for the United Kingdom. Such studies show that reported profits are overstated and total assets are undervalued during and after periods of inflation with traditional accounting concepts relative to an economic concept designed to maintain the firm as an ongoing entity. The paper also discusses a number of factors that have contributed to the marked drop in the rate of return in Canadian manufacturing when both income and assets are valued at replacement costs. Some of these factors are also present in the other industrialized countries, such as increased raw materials prices, and a slower increase in productivity. Other factors have been relatively more important in Canada than in other countries, such as the historically higher level of production costs in Canada than in the United States and Japan, the two most important countries in Canadian trade. This is important during a period of tariff reductions when international competition in manufactured products is widespread. Although corporate profits and the adjusted profits rates of return were depressed by the severity of the 1981-82 recession, some of the key factors depressing the rates of return are longer-term in nature. A continued persistence of these factors during the balance of the 1980s could contribute to restraint in business investment in manufacturing when total returns on a replacement cost basis are so much below the corporate long-term cost of capital. This paper applies the concepts of inflation accounting to total Canadian manufacturing for the period from 1966 to 1982. Measures of rates of return for individual years are provided, both on the basis of total assets and on the basis of the net assets attributable to the owners. There are four sections in the paper after an introduction. Section 2 is a brief conceptual statement and outlines the methods. Section 3 makes comparisons with similar studies for the United Kingdom and summarizes the results of this and other studies. Section 4 discusses the environmental factors for Canadian manufacturing that appear to contribute to the lower rates of return in recent years. Section 5 discusses the implications of the results for future business decisions.     

Population Ageing and Social Security in Asia

Asian countries are at different stages of demographic transition. While Central and South Asian countries are relatively young and will remain so for some time, East and Southeast Asia are expected to age at an unprecedented rate in the next few decades. Japan has reached the future first. Other nations, such as China, are still young but ageing faster than many advanced economies, including Australia and the USA. This demographic shift has considerable implications for the development of social policy. Here too, countries differ widely. This paper sets the context for the rest of the volume. The focus is mostly on countries in East and Southeast Asia, but it includes contrasting comparisons to key regional countries such as India and Australia. First, the paper presents the context: the demographic, urbanization, and social trends facing Asia. Second, it tackles the allocation of resources for the elderly, in particular, by summarizing approaches to two areas of social policy most pertinent to population ageing: retirement income and health care.     

Who Cares about Biodiversity? Optimal Conservation and Transboundary Biodiversity Externalities

The Convention on Biological Diversity’s (2010) target to reduce the rate of biodiversity loss was achieved by very few countries. Why? We use the theory of conservation implicit in the Hotelling model of non-renewable resource pricing to analyze the problem, distinguishing between the benefits to countries where conservation takes place, and to other countries. We estimate models for three taxonomic groups, and find that while individual countries value conservation within their borders, in poor countries this effect is dominated by the negative impact of income growth. International concessional financial contributions to conservation in poor countries are found to be statistically insignificant. We conclude that countries care about the biodiversity within their national borders, but only when development priorities permit, and only when it becomes scarce enough that its value grows more rapidly than the return on alternative assets. There is little evidence that high income countries yet care sufficiently about biodiversity in the places where it is most threatened to affect conservation outcomes there.     

Mind the Gap! International Comparisons of Productivity in Services and Goods Production

Abstract. In this paper, we make a comparison of industry output, inputs and productivity growth and levels between seven advanced economies (Australia, Canada, France, Germany, the Netherlands, United Kingdom and United States). Our industry-level growth accounts make use of input data on labour quantity (hours) and composition (schooling levels), and distinguish between six different types of capital assets (including three information and communication technology (ICT) assets). The comparisons of levels rely on industry-specific purchasing power parities (PPPs) for output and inputs, within a consistent input–output framework for the year 1997. Our results show that differences in productivity growth and levels can be mainly traced to market services, not to goods-producing industries. Part of the strong productivity growth in market services in Anglo-Saxon countries, such as in Australia and Canada, may be related to relatively low productivity levels compared with the United States. In contrast, services productivity levels in continental European countries were on par with the United States in 1997, but growth in Europe was much weaker since then. In terms of factor input use, the United States is very different from all other countries, mostly because of the more intensive use of ICT capital in the United States.     

Do Selection Criteria Make a Difference?: Visa Category and the Labour Market Status of Immigrants to Australia

This paper assesses the role of selection criteria in the immigrant settlement process. Do skill-based immigrants have higher participation and employment rates than family-based immigrants? Does this represent a head start or a persistent labour market advantage? The Longitudinal Survey of Immigrants to Australia is used to address these questions. Generally, migrants selected for their skills have better labour market outcomes. Over time, the relative gap in participation rates increases, while the gap in employment rates decreases. Net of visa category, outcomes are better for native English speakers and for those who visited Australia prior to migration.     

INTERNATIONAL COMPARISONS OF AUSTRALIAN GDP IN THE 19TH CENTURY

This paper summarises the results of a new comparison of the level of Australian and U.K. real product in the 1890s, obtained by the direct deflation of money values of GDP by relative prices. The object of the study was to provide a check on the existing comparisons, obtained by extrapolation of time series of real GDP, as shown, for example, in Maddison (1982). Existing estimates imply that in the 1890s Australian GDP per capita was about 50 percent higher in the U.K. and U.S.A. and more than twice that for the average of 12 other western countries. The present study suggests these results probably overstate Australia's real GDP, and that Australian real GDP per capita was 36 percent higher than the U.K. in 1891 and 3 percent higher in 1900. Personal consumption per capita was 15 percent higher in Australia than in the U.K. in 1891, but about the same level in 1900.
Although this study compares prices and GDP in the colony of New South Wales with those in the U.K., the colony may be taken as representative of Australia as a whole.¹     

Nominal vs real adjustment in demand for money functions

Recently, Fair (1987) has addressd an interesting question in the areas of demand for money, namely, whether the adjustment of actual to desired demand for money is in nominal or real terms. His conclusion, based on time-seies analysis for twenty-seven countries, including a few developing countries, was that the evidence was overwhelmingly in favour of the nominal hypothesis.

The aim of this paper is to address the same issue for eleven Asian countries. In the process, a reformulation of the test procedure used by Fair is suggested. In addition, the question is also examined within the framework of the error correction model. The models are also tested for structural stability.

The scheme of the paper is as follows. The models and the tests are specified in Section I. The data and the estimation issues are dealt with in Section II. Section III presents the results. The paper is concluded with a brief summary of the major findings.     

DEFINING AND MEASURING THE PUBLIC SECTOR: SOME INTERNATIONAL COMPARISONS

The public sector is defined here to include government plus public enterprises. Historically, economists and statisticians have been more concerned with its separate components than with the public sector as a whole, but it is suggested that the public sector may be an appropriate concept for studying several current problems of economic policy. While there is general agreement as to what constitutes government, countries have differing views about what makes an enterprise public. Differences in country definitions of public enterprises are identified as one of the main problems in making international comparisons for the public sector. Statistics are presented for up to 16 OECD countries on the share of the public sector in total final demand, value added, employment, and net lending. It is argued that there is rarely a unique answer to the question “How big is the public sector?” For most countries judicious selection of data and careful definition will lead to different conclusions about the size and growth of the public sector. Because of the lack of data, it is not possible to analyse public sectors in developing countries in the same detail as OECD countries. The evidence available suggests that while public sectors are about the same size in both OECD and developing countries, public enterprises play a more important role in the latter.     

A CROSS-COUNTRY STUDY OF EQUIVALENCE SCALES AND EXPENDITURE INEQUALITY ON UNIT RECORD HOUSEHOLD BUDGET DATA

Inequality comparisons require equivalence scales to account for differences in household size and composition. The multiplicity of equivalence scale models makes the sensitivity of the inequality calculations to the scale used a significant policy issue. Such an investigation based on unit records of two adult households from Italy, Australia, South Africa, Thailand, Peru, Philippines, India and Tanzania was our principal motivation. The equivalence scale varies across countries and between different types of children. Inequality rankings of countries, though not the inequality decomposition between households of different composition, are robust to the equivalence scale used.     

INCOME INEQUALITY IN AUSTRALIA AND NEW ZEALAND: INTERNATIONAL COMPARISONS AND RECENT TRENDS

In this paper we present results on the distribution of income in Australia and New Zealand that can be compared with those for a range of other advanced countries. The framework of analysis, concepts and definitions used have been developed as part of the Luxembourg Income Study (LIS). Using data for the early 1980s, the results indicate that the income distributions in Australia and New Zealand are not, as previous research has suggested, more equal than those in other countries. Neither country has an equivalent net family income inequality ranking in the top half of the eight countries studied. Further analysis indicates increasing inequality in Australia in the first half of the 1980s and, on the basis of some indicators, in New Zealand also. The paper does not investigate the causes of these increases in inequality, although the results indicate that the rise in property income has been a factor behind them.     

Agent-based modelling of novelty creating behavior and sectoral growth effects—Linking the creative and the destructive side of innovation

For grasping the relationship between novelty creating activities of agents and growth of economic aggregates, a multi-level approach is suggested. The first level specifies the triggering conditions for novelty creating activities for the agents, i.e. firms. Here the behavioral elements and the modes of actions for the firms are portrayed using an agent-based approach (Section?2). On the second level, the consequences of successful innovations and imitations in a given sector of economic activities are dealt with (Section?3). This depends on the frequency of successful novelties and on the way they diffuse in that sector. We use an agent-related functional approach, applying difference equations for depicting the stylized facts of the diffusion dynamics. Only if these different levels of economic dynamics are distinguished as well as related to each other, is it possible to derive aggregate effects of novelties for the whole economy. This will be done by way of computer simulations (Section?4). Conclusions are drawn in Section?5.     

Measuring the cost of children

"The purpose of this paper is to present a survey and synthesis of those economic models that have been used to derive estimates of marginal child costs from cross-sectional data on household expenditure patterns [in Australia].... In the next section the argument that the 'costs of children' should not be a concern of social policy is considered (and rejected). Section III then summarises the models.... In Section IV an Engel curve system estimated from the 1988-89 Household Expenditure Survey is used to compare [the models].... In the concluding section some directions for further research and data collection strategies are discussed."     

Monitoring Wage Developments in EMU

The purpose of this paper is to provide a brief review of aggregatewage developments in the EU member states. We start with a short discussion of wage bargaining mechanisms, their impact on labour market outcomes, and take a look into the crystal ball to learn about possible future developments. Section III analyses nominal wage developments focussing, in particular, on the evolution of cross-country patterns as anindicator for the synchronisation of wage developments. Section IV discusses real wage growth in relation to productivity developments using a somewhat refined 'real wage gap indicator';and Section V simply concludes.     

World Agricultural Trade Reform: Implications for Australia

In this paper we assess the implications of agricultural trade reform by GATT member countries. To do this, we link two general equilibrium models, a world food trade model and the ORANI model of the Australian economy. By treating the ORANI model as an integral part of the world model, we are able to focus on the implications for Australia of world agricultural trade reform.
The findings suggest that, if price distorting agricultural policies were removed by GATT member countries, world food commodity prices would rise, some by up to 30 per cent, and world food trade expand by about a third. Australia would be a major beneficiary of these international developments, the value of its agricultural exports rising by close to 15 per cent. In 1986, this would have meant for Australia additional export earnings of around SUS750 million, as well as more rapid economic growth.     

Australia's Foreign Debt: 1975 to 1985

This article analyses Australia's debt accumulation since 1975 and comments on possible future paths of adjustment. In Section 2 we derive a formula describing the dynamics of debt accumulation. In Section 3 we apply the formula with Australian data for the period 1975 to 1985. A detailed analysis of developments in Australia's goods and services account is provided. Section 4 presents concluding remarks and reviews policy options available to Australia in the light of its external economic position. The article includes two appendices. The first contains some forecasts for the next year of developments In Australia's external accounts. The second gives data details and sets out the algebra underlying various computations in the article.     

Macroeconomic Policy and Employment Growth in Australia

Abstract
This article, which explores various aspects of macroeconomic policy and employment growth, is prompted by the relative lack of attention given to these issues in the Green and White Papers on unemployment. The problem of hysteresis reinforces the generally recognised need to reduce the excessive volatility of output and employment growth in Australia. International comparisons presented in the article suggest that Australian output and employment growth have been more volatile than those of the three major OECD countries. Reduction in macroeconomic volatility requires more effective short-term demand management than we have had in the recent past, and in turn, means that we must know more about the strength and timing of the effects of major macroeconomic policy instruments on employment growth and unemployment. This article presents employment growth equations for Australia over the period 1979–93 which incorporate domestic macroeconomic policy effects as well as the influences of the international business cycle. We show that monetary and fiscal policy have had a significant impact on the evolution of employment in Australia and, in particular, that tight monetary and fiscal policy contributed substantially to the recession of 1990–92.