The Population Sub-Group Income Effects on Inequality: Analytical Framework and an Empirical Illustration

A method is developed to examine the population sub-group income effects on inequality using the generalized Theil indices. The proposed method is illustrated by computing the effects of marginal changes in the occupation-specific incomes on per capita income inequality in Australia based on data for 7197 sample households relating to the 1988-89 Household Expenditure Survey conducted by the Australian Bureau of Statistics (ABS). The study shows that the growth of (distribution neutral) per capita income in four occupations, namely, unemployed and pensioners, trade-persons, machine operators and laborers, is inequality reducing whereas the growth of per capita income in all other occupations is inequality augmenting. The occupation-specific income effects on between-group inequality are, however, stronger than those on within-group inequality. These findings are invariant to the choice of alternative distributional weights used in the generalized Theil indices.     

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.     

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.     

Multidimensional Inequality Across Three Developed Countries

This paper produces comparable estimates of multidimensional inequality for the U.S., Germany, and Australia. Two alternative approaches with differing interpretations are employed. The first method projects all facets of welfare onto a single variable which is then analyzed using standard univariate techniques. The second approach establishes equivalent‐income distributions that would lead to an equalization of welfare, such that the difference between this counterfactual and the true income distribution can be measured. This difference is then interpreted as the degree of income redistribution required to offset welfare inequality. Using data on permanent incomes, health scores, years of education, and leisure times, we observe much higher levels of inequality in the U.S. than in Germany or Australia. Our results are highly statistically significant and hold over a large variety of weighting specifications.     

Policy,Demography, and Market Income Volatility: What Shaped Income Distribution and Inequality in Australia Between 2002 and 2016?

Isolating the impact of policy, demographic shifts, and market volatility on changes in income inequality is of great interest to policymakers. However, such estimation can be difficult due to the complex interactions and evolutions in the social and economic environment. Through an extended decomposition framework, this paper estimates the effect of four main components (policy, demography, market income and other factors) on the year-over-year changes in income inequality in Australia between 2002 and 2016. This was a period marked by substantial policy, population, and economic shifts due to factors such as the mining boom, the global financial crisis and increasing immigration. The framework also incorporates a flexible non-parametric market income model which captures demand-side shock better than a standard parametric model. Our results suggest that market income was the primary driver of income inequality for all segments of the income distribution in Australia over the past 15 years. Policy factors, moreover, have had the largest net impact on reducing inequality overall, especially for lower income earners.     

Analyzing Income Distribution in Australia*

This paper contains an analysis of the sources of income inequality in Australia, based on data from the ABS income survey for 1978-79. The analysis proceeds by progressive decomposition of the population into component groups differentiated by characteristics such as sex, age, employment status and occupation. At each stage of the decomposition, total inequality is partitioned into contributions from within and between the component groups, as measured by the Shorrocks Iq index. The importance of the characteristic in question as a source of inequality can then be assessed. While the results of the analysis are described in some detail, the emphasis of the paper is primarily methodological.     

CHANGES IN INCOME INEQUALITY: AUSTRALIA, 1968–69 TO 1973–74

The period 1968–69 to 1973–74 saw a redistribution of incomes in Australia. This is evidenced first by declining differentials between dissimilar persons and secondly by changes in two measures of income inequality, the Gini and Theil coefficients.
The inequality coefficients are decomposed into components which distinguish between that part of total inequality due to income differences between dissimilar persons and that part due to inequality between similar persons. It is found that the reduction in inequality was due to the reduction in differentials between dissimilar persons and that inequality between similar persons probably did not change over the period.     

The Relationship between Income,Wealth and Age in Australia

This article analyses the relationship between income, wealth, wealth‐adjusted income and age in Australia using a 2009–10 cross‐sectional data set. The main findings are: (i) wealth and wealth‐adjusted income generally rise with age, while income is constant across the life cycle; (ii) both income inequality and wealth inequality rise until mid‐life and fall thereafter, while wealth‐adjusted income inequality depends on the method of calculation used, one showing a fall in later life and another showing no fall; and (iii) after income, wealth and wealth‐adjusted income inequalities are adjusted for age, underlying inequality is lower in all three cases.     

Longer Run Changes in the Distribution of Income in Australia*

This paper brings new evidence to bear on the question of changes in income distribution amongst individuals in Australia between 1942–43and 1989–90. The changes observed over this period are analyzed in the context of previous studies of the changing distribution of income in Australia over the past 80 years. The main conclusions of the paper are that the distribution of individual income in J 989–90is very similar to that estimated for 1942–43, and there is evidence that income inequality has been increasing during the 1980s     

Financial development,control of corruption and income inequality

This paper examines the effect of financial development and control of corruption on income inequality in 21 Sub-Saharan African (SSA) countries over the period 1985–2011 using the pooled mean group (PMG) estimator. The empirical results show that financial development measures have positive impact on income inequality, which suggest that financial development increases income inequality. On the other hand, the coefficients of control of corruption are negative and significantly related to income inequality which implies that corruption control reduces income inequality. Further, the interaction of the financial development and the control of corruption is found to be negatively and significantly related to income inequality. Equally the interaction of the financial development and transparency index (an alternate measure of corruptibility) is found to be negatively and significantly related to income inequality. These findings suggest that the control of corruption and transparency in governance are crucial in reducing income inequality in SSA.     

Sources of Income Inequality in Australia, 1968-69*

There are wide divergences in the mean incomes of males and females in Australia. In addition income is related to age, education and work force participation. This paper uses decompositions of Theil and Gini income-inequality coefficients to examine the extent to which inequality of earned income may be explained by these various factors. It is suggested that education and age, singly and jointly, explain a major part of inequality. Having allowed for these factors, sex appears to have a limited residual importance.     

The Distributional Effects of Inflation in Australia 1980–1995

This paper examines the distributional effects of price changes in Australia over the period 1980 to 1995, using equivalent variations and equivalent incomes. The Linear Expenditure System is applied to each of a range of income groups rather than using a single set of parameters. The price changes are found to impose a relatively higher burden on lower income groups in some years, although in other years the higher income groups were affected relatively more. The distribution of equivalent incomes has the highest inequality in years of high overall inflation. However, the effects on inequality are low: the highest increase in inequality as a result of differential price changes is less than one per cent.     

The Changing Pattern of Sources of Income and its Impact on Inequality: The Method and its Application to Australia, 1975–94

This paper proposes a new method of explaining the temporal change in economic inequality in terms of changes in the sources of income. The method is based on the decomposition of the Gini coefficient by source of income. Using this method, the paper also examines changes of the sources of private income in Australia over the last two decades and their impact on the distribution of income. It will be seen that not only have the shares of income from different sources changed, but that there has been significant change in inequality of distribution of the components themselves.     

Routine

Temporal routine - maintaining the same schedule from day to day - saves time. It is also boring and inherently undesirable. As such, the amount of temporal routine a person engages in is partly an economic outcome, affected by variations in the price of time, household income and the ability to generate variety. Using time-budget data from Australia, Germany, the Netherlands and the United States, I show that men engage in more routine behavior than women, because they spend more time in (routine) market work. More educated people engage in less routine behavior; higher household incomes enable people to purchase more temporal variety. Spouses’ temporal routines are highly complementary. The positive income effects and impacts of schooling indicate yet another avenue by which standard measures of inequality understate total economic inequality.     

Statistical Inference and Changes in Income Inequality in Australia

This paper studies the changes in income inequality in Australia between 1986 and 1999, using the Gini coefficient and Theil's inequality measure. Individuals are divided into various subgroups along several dimensions, namely region of residence, employment status, occupation and age. The change in inequality over time, between and within these subgroups is studied, and the bootstrap method is used to establish whether these changes are statistically significant .     

我国城镇居民收入分配差距的实证研究

笔者首先计算了几种度量收入分配差距的指标,从不同角度的分析得到了我国城镇居民收入分配差距不断扩大的结论;其次估计了我国城镇居民的基尼系数.通过计量经济模型,检验了高、中、低各阶层可支配收入与收入分配差距之间的关系,得出结论:增加中低收入阶层的可支配收入,遏制高收入阶层可支配收入,可以减小基尼系数,从而降低收入分配差距;进一步通过模型发现,我国发达地区的经济发展和收入分配差距呈现出倒U型规律,说明经济发展达到一定水平,收入分配差距有望缩小.     

The role of education and household composition for transitory and permanent income inequality–evidence from PSID data

Transitory and permanent shocks to income have been shown to be important determinants of household consumption. This paper shows that there are significant differences in the trends of transitory and permanent income inequality between demographic groups since the 1980s. Using data from the Panel Study of Income Dynamics, educational attainment and the composition of a household are found to play a key role. While permanent inequality increases steadily for educated households, it is flat over large parts of the sample period for the less educated households. Transitory inequality increases for all households headed by couples whereas it is constant for single households. Altogether, permanent shocks account for a larger part of the income variance of educated households whereas transitory shocks are relatively more important for the less educated. These results are able to shed light on the transmission of changes in income inequality to consumption inequality.     

ECONOMIC FREEDOM AND INCOME INEQUALITY REVISITED: EVIDENCE FROM A PANEL ERROR CORRECTION MODEL

We investigate the causal relationship between income inequality and economic freedom using data from U.S. states over the period 1981 to 2004 within a panel error correction model framework. The results indicate bidirectional causality between income inequality and economic freedom in both the short and the long run. These results suggest that high income inequality may cause states to implement redistributive policies causing economic freedom to decline. As economic freedom declines, income inequality rises even more. In other words, it is quite possible for a state to get caught in a vicious circle of high income inequality and heavy redistribution. (JEL D63, H11)     

The political economy of public education

I study the relationship between income inequality and public spending in education in a voting model. Voters collectively choose the uniform quality level of public education, the amount of a public good, and the tax rate on labor income. Parents can decide to opt-out of the public education system by purchasing private education at the desired quality level, and children’s expected income is assumed to be increasing in the quality of education. I show that higher income inequality is associated with higher governmental spending in education if and only if the expected marginal returns to education are larger for the children of relatively low income parents. In turn, better public education tends to reduce future inequality. These results are consistent with most findings in the empirical literature about public investment in education. Lastly, I show that for other kind of publicly provided goods, such as health care, the relationship with income inequality exhibits an ambiguous or opposite sign.     

Non-Linearity and Cross-Country Dependence of Income Inequality

We use top income data and the newly developed regime-switching Gaussian mixture vector autoregressive model to explain the dynamics of income inequality in developed economies within the past 100 years. Our results indicate that the process of income inequality consists of two equilibria identifiable by high inequality and high income fluctuations, and low inequality and low income fluctuations. Our results also imply that income inequality in the United States is the driver of income inequality in other developed economies. High wages and capital gains are found to be the likely channels for the U.S. influence.