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Distributional Impact of Commodity Price Shocks: Australia over a Century

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  • Sambit Bhattacharyya
  • Jeffrey G. Willliamson

Abstract

Abstract. This paper studies the distributional impact of commodity price shocks over the both the short and very long run. Using a GARCH model, we find that Australia experienced more volatility than many commodity exporting developing countries over the periods 1865- 1940 and 1960-2007. A single equation error correction model suggests that commodity price shocks increase the income share of the top 1, 0.05, and 0.01 percents in the short run. The very top end of the income distribution benefits from commodity booms disproportionately more than the rest of the society. The short run effect is mainly driven by wool and mining and not agricultural commodities. A sustained increase in the price of renewables (wool) reduces inequality whreas the same for non-renewable resources (minerals) increases inequality. We expect that the initial distribution of land and mineral resources explains the asymmetric result.

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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number OxCarre Research Paper 117.

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Date of creation: 23 Jul 2013
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Handle: RePEc:oxf:wpaper:oxcarre-research-paper-117

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Keywords: comodity price shocks; commodity exporters; top incomes; inequality;

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Cited by:
  1. Marchand, Joseph, 2014. "The Distributional Impacts of an Energy Boom in Western Canada," CLSSRN working papers clsrn_admin-2014-28, Vancouver School of Economics, revised 16 Jun 2014.

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