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Stochastic Dominance Analysis Of Australian Income Distributions

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  • Rebecca Valenzuela
  • Hooi Hooi Lean

Abstract

We apply stochastic dominance tests to investigate trends in inequality in Australia over the period 1983 to 1998. Results show significant levels of inequalities in the income and expenditure distributions for the population as a whole as well as within population groups. We further find that the impact of the government’s tax and transfer redistribution scheme varied greatly among the different demographic groups. After tax and transfers are made, significant gains in welfare levels were observed for migrant and single-parents households compared to their non-migrant and couple-parent counterparts respectively. In contrast, welfare levels of male-headed households continue to dominate those of female households post tax and that there is limited government capacity for closing the existing gap in incomes and expenditures among households without children.

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File URL: http://www.buseco.monash.edu.au/eco/research/papers/2007/2107stochasticvalenzuelalean.pdf
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Paper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number 21-07.

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Length: 28 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:mos:moswps:2007-21

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  1. Charles M. Beach & Russell Davidson & George A. Slotsve, 1994. "Distribution-Free Statistical Inference for Inequality Dominance with Crossing Lorenz Curves," Working Papers 912, Queen's University, Department of Economics.
  2. Harding, Ann & Szukalska, Aggie, 2000. "Trends in Child Proverty in Australia, 1982 to 1995-96," The Economic Record, The Economic Society of Australia, vol. 76(234), pages 236-54, September.
  3. Ann Harding, 1997. "The Suffering Middle: Trends in Income Inequality in Australia, 1982 to 1993-94," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 30(4), pages 341-358.
  4. Garry Barrett & Thomas Crossley & Christopher Worswick, 1999. "Consumption and Income Inequality in Australia," CEPR Discussion Papers 404, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  5. Kaur, Amarjot & Prakasa Rao, B.L.S. & Singh, Harshinder, 1994. "Testing for Second-Order Stochastic Dominance of Two Distributions," Econometric Theory, Cambridge University Press, vol. 10(05), pages 849-866, December.
  6. Esfandiar Maasoumi & Almas Heshmati, 2000. "Stochastic dominance amongst swedish income distributions," Econometric Reviews, Taylor & Francis Journals, vol. 19(3), pages 287-320.
  7. Pendakur, Krishna, 1998. "Changes in Canadian Family Income and Family Consumption Inequality between 1978 and 1992," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 44(2), pages 259-83, June.
  8. Barrett, Garry F & Crossley, Thomas F & Worswick, Christopher, 2000. "Demographic Trends and Consumption Inequality in Australia between 1975 and 1993," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 46(4), pages 437-56, December.
  9. Shorrocks, Anthony F, 1983. "Ranking Income Distributions," Economica, London School of Economics and Political Science, vol. 50(197), pages 3-17, February.
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