IDEAS home Printed from https://ideas.repec.org/p/iae/iaewps/wp2014n02.html
   My bibliography  Save this paper

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

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Nicolas Herault & Francisco Azpitarte, 2014. "Recent Trends in Income Redistribution in Australia: Can Changes in the Tax-Transfer System Account for the Decline in Redistribution?," Melbourne Institute Working Paper Series wp2014n02, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  • Handle: RePEc:iae:iaewps:wp2014n02
    as

    Download full text from publisher

    File URL: http://melbourneinstitute.unimelb.edu.au/downloads/working_paper_series/wp2014n02.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Banks, James & Johnson, Paul, 1994. "Equivalence Scale Relativities Revisited," Economic Journal, Royal Economic Society, vol. 104(425), pages 883-890, July.
    2. John Creedy & Nicolas Hérault, 2011. "Decomposing Inequality and Social Welfare Changes: The Use of Alternative Welfare Metrics," Melbourne Institute Working Paper Series wp2011n08, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    3. Alfred Michael Dockery & Paul Flatau, 2008. "An analysis of the impact of tax and welfare reform measures on effective marginal tax rates in Australia 1982-2002," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 11(3), pages 203-226, September.
    4. 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.
    5. Anthony B. Atkinson & Andrew Leigh, 2007. "The Distribution of Top Incomes in Australia," The Economic Record, The Economic Society of Australia, pages 247-261.
    6. Ivica Urban, 2009. "Kakwani decomposition of redistributive effect: Origins, critics and upgrades," Working Papers 148, ECINEQ, Society for the Study of Economic Inequality.
    7. Guyonne Kalb & Rosanna Scutella, 2002. "Estimation of Wage Equations in Australia: Allowing for Censored Observations of Labour Supply," Melbourne Institute Working Paper Series wp2002n08, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    8. George W. Evans & Seppo Honkapohja, 2006. "Monetary Policy, Expectations and Commitment," Scandinavian Journal of Economics, Wiley Blackwell, pages 15-38.
    9. Kakwani, Nanok C, 1977. "Measurement of Tax Progressivity: An International Comparison," Economic Journal, Royal Economic Society, vol. 87(345), pages 71-80, March.
    10. 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.
    11. 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.
    12. 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.
    13. 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.
    14. Francesca Bastagli & David Coady & Sanjeev Gupta, 2012. "Income Inequality and Fiscal Policy (2nd Edition)," IMF Staff Discussion Notes 12/08R, International Monetary Fund.
    15. Olivier Bargain, 2012. "Decomposition analysis of distributive policies using behavioural simulations," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(5), pages 708-731, October.
    16. 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.
    17. 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.
    18. Dardanoni, Valentino & Lambert, Peter J., 2002. "Progressivity comparisons," Journal of Public Economics, Elsevier, pages 99-122.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Taxes and transfers; income inequality; progressivity; redistributive effect;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iae:iaewps:wp2014n02. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Abbey Treloar). General contact details of provider: http://edirc.repec.org/data/mimelau.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.