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Distributional Impact of Commodity Price Shocks: Australia over a Century

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  • Bhattacharyya, Sambit
  • Williamson, Jeffrey G

Abstract

This paper explores 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 poor countries between 1865 and 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 percent in the short run. The very top end of the income distribution benefits from commodity booms disproportionately more than the rest of 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 whereas 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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  • Bhattacharyya, Sambit & Williamson, Jeffrey G, 2013. "Distributional Impact of Commodity Price Shocks: Australia over a Century," CEPR Discussion Papers 9582, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:9582
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    Cited by:

    1. Joseph Marchand, 2015. "The distributional impacts of an energy boom in Western Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 48(2), pages 714-735, May.
    2. Bhattacharyya, Sambit & Resosudarmo, Budy P., 2015. "Growth, Growth Accelerations, and the Poor: Lessons from Indonesia," World Development, Elsevier, vol. 66(C), pages 154-165.
    3. Marchand, Joseph & Weber, Jeremy, 2016. "Local Labor Markets and Natural Resources: A Synthesis of the Literature," Working Papers 2016-10, University of Alberta, Department of Economics, revised 24 Jan 2017.
    4. World Bank, 2014. "Indonesia - Avoiding the Trap : Development Policy Review 2014," World Bank Other Operational Studies 19326, The World Bank.
    5. World Bank, 2014. "Indonesia : Avoiding the Trap," World Bank Other Operational Studies 18944, The World Bank.

    More about this item

    Keywords

    Australia; commodity exporters; commodity price shocks; income inequality;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • N17 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Africa; Oceania
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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