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Does demand create poor quality supply: a critique of alternative distributional analyses


  • Michael Carnahan

    (Treasury, Government of Australia)


The release of any major reform proposal creates considerable uncertainty amongst the community. In the vast majority of cases, and for the vast majority of reform proposals, these questions cannot be answered definitively. However, what can be predicted with certainty is that there will be a rekindling of interest in distributional analysis. The major conclusion in this paper is that the best estimate of the impact on a household of a change in prices is the population CPI impact, and the best estimate of household saving rates is either the population saving rate or zero. Hence, this approach was adopted in the distributional analysis undertaken in the Government’s tax reform document A New Tax System. The purpose of this paper is to provide a critique of this approach and the alternatives.

Suggested Citation

  • Michael Carnahan, 1998. "Does demand create poor quality supply: a critique of alternative distributional analyses," Economic Roundup, The Treasury, Australian Government, issue 4, pages 37-50, November.
  • Handle: RePEc:tsy:journl:journl_tsy_er_1998_4_1

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    References listed on IDEAS

    1. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, April.
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    More about this item


    goods and services; supply and demand;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth


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