Melbourne Institute of Applied Economic and Social Research - Research Publications
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ItemHave tax-transfer policy reforms increased inequality?(Melbourne Institute of Applied Economic and Social Research, 2020-02-01)Australia has experienced 28 years of uninterrupted annual economic growth. Since reaching a peak of 11 per cent in 1993, the unemployment rate declined sharply and has been below 6 per cent for most of the period since mid-2003. Yet despite unprecedented economic expansion in Australia since the mid-1990s, fiscal reform has created a less progressive tax-transfer system, contributing to rising income inequality.
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ItemRecent Trends in Income Redistribution in Australia: Can Changes in the Tax-Benefit System Account for the Decline in Redistribution?(Wiley, 2015-03-01)We examine trends in the redistributive impact of the tax-benefit system in Australia between 1994 and 2009 using a framework that allows us to separate the contributions of taxes, benefits, and taxes and benefits combined. Furthermore, we identify the effect of tax-benefit policy reforms on income redistribution over the period. We find that after reaching a peak value in the late 1990s, the redistributive effect of taxes and benefits declined sharply. Although reforms to the tax-benefit system contributed to the decline in redistribution, their contribution was limited compared to the role played by the changes in market income distribution.
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ItemUnderstanding Changes in the Distribution and Redistribution of Income: A Unifying Decomposition Framework(Wiley, 2016-06)In recent decades income inequality has increased in many developed countries but the role of tax and transfer reforms is often poorly understood. We propose a new method allowing for the decomposition of historical changes in income distribution and redistribution measures into: (i) the immediate effect of tax-transfer policy reforms in the absence of behavioral responses; (ii) the effect of labor supply responses induced by these reforms; and (iii) a third component allowing us to explore the effect of changes in the distribution of a wide range of determinants, including the effect of employment changes not induced by policy reforms. The application of the decomposition to Australia reveals that the direct effect of tax-transfer policy reforms accounts for half of the observed increase in income inequality between 1999 and 2008, while the increased dispersion of wages and capital incomes also played an important role.