THE COST OF INCOME REDISTRIBUTION IN AUSTRALIA

This paper analyses the effect of raising effective marginal tax rates on the income of the representative household in each gross income decile in Australia by one percentage point, and distributing the proceeds of the tax increase either in the form of an equal grant, or as an equal payment to members of households in the lower half of the income distribution. The effectiveness of the program in redistributing income is measured as the ratio of total gains in disposable income to households in target deciles to losses in non-target groups, or as the proportional reduction in the poverty gap. The cost is measured as the ratio of the sum of the income-equivalent of changes in the welfare of non-target groups to those of target groups, or as the ratio of income-equivalent losses to gains.     

THE INCOME UNIT AND THE ANATOMY OF INCOME DISTRIBUTION*

This paper focuses on a neglected aspect of the treatment of the income unit in the construction of size distributions of income. If the size distribution is to be an indicator of the distribution of economic welfare, and if the economic welfare of each individual in society is to count equally, then conventional distributions are inconsistent with individualistic welfare functions. We estimate size distributions with each person's welfare weighted equally, and contrast these results with those weighting each household unit's welfare equally. The choice of weights is shown to affect both the level and the trend in income inequality.     

ON EQUITY ASPECTS OF IMPERFECT INCOME REDISTRIBUTION

We develop a theoretical analysis of the impact of imperfect targeting, participation costs and incomplete take-up upon the level of progressivity, vertical equity, horizontal inequity and redistribution exerted by state benefits. An illustration using the distribution of British Supplementary Benefits (now Income Support) indicates that progressivity is roughly untouched, vertical equity and horizontal inequity are increased, and total income redistribution is slightly increased by these redistributive imperfections in 1985 Britain.     

INCOME REDISTRIBUTION THROUGH THE TAX SYSTEM: A SIMULATION ANALYSIS OF TAX REFORM

In this paper, we consider reforming the tax system to a comprehensive income tax model in order to amend the differential treatment of income sources. Our simulation analysis shows that the tax reform improves the effectiveness of the tax system on the redistribution of all sources of income including earned income, financial wealth income, and imputed rent. The analysis of incidence of the tax reform suggests that the tax burden for young renters decreases the most and that for young loan-free land owners increases the most through this tax reform.     

THE IMPORTANCE OF ASSET INCOME AMONG THE ELDERLY*

This paper focuses on the income patterns among the elderly. The life cycle hypothesis suggests that income and assets will decline after retirement. Data from the 1980 U.S. decennial census confirms that total income declines for succeeding elderly cohorts. The census data, however, shows that income from assets for elderly cohorts increases until the cohort aged 85 years and older. This pattern is similar for different sex-marital groups. Recent research that has addressed the issue of savings among the elderly is summarized and four possible explanations for the increase in income from assets found in the decennial census are discussed. We conclude by suggesting the implications of this data for the life cycle theory and public policy.     

DOES CONSUMPTION ENTAIL INCOME? IMPLICATIONS OF THE DUAL CLASSIFICATION OF CONSUMPTION EXPENDITURE FOR THE INCOME SIDE OF THE HOUSEHOLD SECTOR IN THE NATIONAL ACCOUNTS*

In the future revision of the SNA the dual classification of flows in the national accounts will gain some importance with respect to consumption expenditures. It is likely that outlays of different institutions for consumption are added to form a new aggregate “individual consumption.” The question is whether this development requires an adjustment on the income side of the household accounts. In order to find an answer it is first necessary to scrutinize the concept of disposable income in its standard form, and in its different variations. The result is a distinction between “disposable income in the strict sense” and “income after distribution,” where the standard definition actually realizes the latter concept. It is then shown that the dual structure of the accounts does not permit the adding of individual consumption to saving of households so that the concept of enlarged income defeats its purpose.