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Inequality in Australia 1983-2004: A Stochastic Dominance Approach

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  • Hooi Hooi Lean
  • Ma. Rebecca Valenzuela

Abstract

In this paper, we employ stochastic dominance analysis on Australian unit records to investigate trends in inequality and relative welfare levels in Australia over the period 1983 to 2004. We find that that when the stochastic dominance tests are applied to income and expenditure distributions for the entire population, net transfers to households do not appear to make any significant difference on the distribution of inequality existing for each year. However, when analysis is applied to particular population subgroups in the economy, the tests show that taxes and transfers do improve existing imbalances in the distribution of welfare. Our group results strong evidence of long-term disparities in the relative welfare levels of male-headed over female-headed households, of households with children over those without, and of couple-parents families over their single-parent counterparts.

Suggested Citation

  • Hooi Hooi Lean & Ma. Rebecca Valenzuela, 2012. "Inequality in Australia 1983-2004: A Stochastic Dominance Approach," Monash Economics Working Papers 06-12, Monash University, Department of Economics.
  • Handle: RePEc:mos:moswps:2012-06
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    File URL: http://www.buseco.monash.edu.au/eco/research/papers/2012/0612inequalityleanvalenzuela.pdf
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    References listed on IDEAS

    as
    1. Aaron Nicholas & Ranjan Ray & Ma. Rebecca Valenzuela, 2010. "Evaluating the Distributional Implications of Price Movements: Methodology, Application and Australian Evidence," The Economic Record, The Economic Society of Australia, vol. 86(274), pages 352-366, September.
    2. Jonathan Heathcote & Fabrizio Perri & Giovanni L. Violante, 2010. "Unequal We Stand: An Empirical Analysis of Economic Inequality in the United States: 1967-2006," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(1), pages 15-51, January.
    3. Barrett, Garry F & Crossley, Thomas F & Worswick, Christopher, 2000. "Demographic Trends and Consumption Inequality in Australia between 1975 and 1993," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 46(4), pages 437-456, December.
    4. Thomas F. Crossley & Krishna Pendakur, 2002. "Consumption Inequality," Department of Economics Working Papers 2002-09, McMaster University.
    5. Matthew Brzozowski & Martin Gervais & Paul Klein & Michio Suzuki, 2010. "Consumption, Income, and Wealth Inequality in Canada," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(1), pages 52-75, January.
    6. Barrett, Garry F & Crossley, Thomas F & Worswick, Christopher, 2000. "Consumption and Income Inequality in Australia," The Economic Record, The Economic Society of Australia, vol. 76(233), pages 116-138, June.
    7. David Johnson & Roger Wilkins, 2004. "Effects of Changes in Family Composition and Employment Patterns on the Distribution of Income in Australia: 1981-1982 to 1997-1998," The Economic Record, The Economic Society of Australia, vol. 80(249), pages 219-238, June.
    8. Kaur, Amarjot & Prakasa Rao, B.L.S. & Singh, Harshinder, 1994. "Testing for Second-Order Stochastic Dominance of Two Distributions," Econometric Theory, Cambridge University Press, vol. 10(05), pages 849-866, December.
    9. George Athanasopoulos & Farshid Vahid, 2003. "Statistical Inference and Changes in Income Inequality in Australia," The Economic Record, The Economic Society of Australia, vol. 79(247), pages 412-424, December.
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    Cited by:

    1. Esfandiar Maasoumi & Almas Heshmati, 2013. "Analysis of Stochastic Dominance Ranking of Chinese Income Distributions by Household Attributes," Emory Economics 1308, Department of Economics, Emory University (Atlanta).

    More about this item

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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