Growth and Inequality
Papers
Income Dynamics across Group, Time and Space in Australia
Darapheak Tin, Chung Tran & Nabeeh Zakariyya
[Paper] [Slides]
We provide a large number of statistics about incidence of economic growth, the distribution of individual income levels and individual income changes, the redistribution role of taxes and transfers, using household survey and administrative data from Australia.
Uninterrupted Growth, Redistribution and Inequality – The Australian Case
Chung Tran & Nabeeh Zakariyya
[Paper] [Slides] [Online Empirical Appendix]
To what extent can a progressive tax and transfer system moderate the distributional impacts of uneven economic growth? We revisit this question in the unique Australian context of three decades of uninterrupted economic growth from 1991 to 2020. We use longitudinal tax records of millions of Australian taxpayers and document the distributional impacts of uneven growth and the redistributive role of progressive income taxes and targeted transfers. Our results show uneven sharing of income growth, favoring higher income groups. Increasing tax and transfer progressivity played an important role in moderating these uneven gains across groups and over lifetimes. While inter-cohort income inequality increased over time, lifetime inequality within cohorts was relatively lower and more stable, revealing biases in cross-sectional analyses. Using a dynamic general equilibrium lifecycle model, we highlight efficiency and equity trade-offs when implementing more progressive tax and transfer policies.
Interactive results
+ Income growth over the life cycle
This paper is part of the Australian Research Council funded project “Lifetime Approach to Measuring Inequality in Living Standards in Australia”.
Lifecycle Earnings Risk and Insurance: New Evidence from Australia
Darapheak Tin & Chung Tran
ECONOMIC RECORD, VOLUME 99, ISSUE 325, PAGES 141-174 | JUNE 2023
[Publication] [Paper] [Slides] [Appendix]
This paper studies the nature of earnings dynamics in Australia, using the Household, Income and Labour Dynamics in Australia (HILDA) Survey 2001-2020. Our results indicate that the distribution of earnings shocks displays negative skewness and excess kurtosis, deviating from the conventional linearity and normality assumptions. Wage changes are strongly associated with earnings changes and account more for the dispersion of earnings shocks; meanwhile, the contribution of hour changes is largely absent in upward movement and relatively small in downward movement of earnings changes. Furthermore, family and government insurance play distinct roles in reducing exposure to earnings risk. Government insurance embedded in the targeted transfer system is important in mitigating the dispersion of shocks, whereas family insurance via income pooling and adjustment of secondary earners’ labour market activities is dominant in reducing the magnitude and likelihood of extreme and rare shocks. The magnitude and persistence of earnings risk as well as the insurance role of family and government vary significantly across gender, marital and parental status. Accounting for these non-Gaussian and non-linearity features is important for evaluating the insurance role of government transfer programs.
This paper is part of the Australian Research Council funded project “Lifetime Approach to Measuring Inequality in Living Standards in Australia”.