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Recent Trends in Income Redistribution in Australia: Can Changes in the Tax-Transfer System Account for the Decline in Redistribution?

  • Nicolas Herault

    ()

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

  • Francisco Azpitarte

    ()

    (Brotherhood of St Laurence; and Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

We examine trends in the redistributive impact of the tax-transfer system in Australia between 1994 and 2009 using a framework that allows us to separate the contributions of taxes and benefits to overall income redistribution. Furthermore, we identify the effect of tax-transfer policy reforms on changes in income redistribution over the period by controlling for changes in the distribution of market incomes. We find that after reaching a peak value in the late 1990s, the redistributive impact of taxes and transfers steadily declined. Although reforms to the tax-transfer system contributed to the decline in redistribution, their contribution was limited.

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Paper provided by Melbourne Institute of Applied Economic and Social Research, The University of Melbourne in its series Melbourne Institute Working Paper Series with number wp2014n02.

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Length: 29pp
Date of creation: Jan 2014
Date of revision:
Handle: RePEc:iae:iaewps:wp2014n02
Contact details of provider: Postal: Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Victoria 3010 Australia
Phone: +61 3 8344 2100
Fax: +61 3 8344 2111
Web page: http://www.melbourneinstitute.com/
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  1. Ann Harding & Quoc Ngu Vu & Alicia Payne & Richard Percival, 2009. "Trends in Effective Marginal Tax Rates in Australia from 1996-97 to 2006-07," The Economic Record, The Economic Society of Australia, vol. 85(271), pages 449-461, December.
  2. Nicolas Herault & Francisco Azpitarte, 2013. "Understanding Changes in Progressivity and Redistributive Effects: The Role of Tax-Transfer Policies and Labour Supply Decisions," Melbourne Institute Working Paper Series wp2013n33, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  3. Kakwani, Nanok C, 1977. "Measurement of Tax Progressivity: An International Comparison," Economic Journal, Royal Economic Society, vol. 87(345), pages 71-80, March.
  4. Mervyn A. King, 1980. "An Index of Inequality: With Applications to Horizontal Equity and Social Mobility," NBER Working Papers 0468, National Bureau of Economic Research, Inc.
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  6. Guyonne Kalb & Rosanna Scutella & Hsein Kew, 2002. "Estimation of Wage Equations in Australia: Allowing for Censored Observations of Labour Supply," Melbourne Institute Working Paper Series wp2002n26, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  7. Ivica Urban & Peter J. Lambert, 2008. "Redistribution, Horizontal Inequity, and Reranking: How to Measure Them Properly," Public Finance Review, , vol. 36(5), pages 563-587, September.
  8. John Creedy & Nicolas Hérault†, 2011. "Decomposing Inequality and Social Welfare Changes : The Use of Alternative Welfare Metrics," Department of Economics - Working Papers Series 1121, The University of Melbourne.
  9. Banks, James & Johnson, Paul, 1994. "Equivalence Scale Relativities Revisited," Economic Journal, Royal Economic Society, vol. 104(425), pages 883-90, July.
  10. Francesca Bastagli & David Coady & Sanjeev Gupta, 2012. "Income Inequality and Fiscal Policy (2nd Edition)," IMF Staff Discussion Notes 12/08R, International Monetary Fund.
  11. Ivica Urban, 2009. "Kakwani decomposition of redistributive effect: Origins, critics and upgrades," Working Papers 148, ECINEQ, Society for the Study of Economic Inequality.
  12. A.B. Atkinson & Andrew Leigh, 2006. "The Distribution of Top Incomes in Australia," CEPR Discussion Papers 514, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  13. Jenkins, Stephen P & Cowell, Frank A, 1994. "Parametric Equivalence Scales and Scale Relativities," Economic Journal, Royal Economic Society, vol. 104(425), pages 891-900, July.
  14. Dardanoni, Valentino & Lambert, Peter J., 2002. "Progressivity comparisons," Journal of Public Economics, Elsevier, vol. 86(1), pages 99-122, October.
  15. Peter Whiteford, 2010. "The Australian Tax‐Transfer System: Architecture and Outcomes," The Economic Record, The Economic Society of Australia, vol. 86(275), pages 528-544, December.
  16. King, Mervyn A, 1983. "An Index of Inequality: With Applications to Horizontal Equity and Social Mobility," Econometrica, Econometric Society, vol. 51(1), pages 99-115, January.
  17. Olivier Bargain, 2012. "Decomposition analysis of distributive policies using behavioural simulations," International Tax and Public Finance, Springer, vol. 19(5), pages 708-731, October.
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