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Publication Details

08 Apr 20

Policy, Demography, and Market Income Volatility: What Shaped Income Distribution and Inequality in Australia Between 2002 and 2016?

Authors: LI Jinjing, LA Hai Anh, SOLOGON Denisa.

Online First: 08/04/2020

DOI: http://doi.org/10.1111/roiw.12467

Abstract:

Isolating the impact of policy, demographic shifts, and market volatility on changes in income inequality is of great interest to policymakers. However, such estimation can be difficult due to the complex interactions and evolutions in the social and economic environment. Through an extended decomposition framework, this paper estimates the effect of four main components (policy, demography, market income and other factors) on the year?over?year changes in income inequality in Australia between 2002 and 2016. This was a period marked by substantial policy, population, and economic shifts due to factors such as the mining boom, the global financial crisis and increasing immigration. The framework also incorporates a flexible non?parametric market income model which captures demand?side shock better than a standard parametric model. Our results suggest that market income was the primary driver of income inequality for all segments of the income distribution in Australia over the past 15 years. Policy factors, moreover, have had the largest net impact on reducing inequality overall, especially for lower income earners.

Reference: LI Jinjing, LA Hai Anh, SOLOGON Denisa. Policy, Demography, and Market Income Volatility: What Shaped Income Distribution and Inequality in Australia Between 2002 and 2016? Review of Income and Wealth, 2020.

Keywords:
income inequality,
inequality decomposition,
ageing,
market income,
STINMOD+,
policy reform

Project: Tax-benefit systems, employment structures and cross-country differences in income inequality in Europe: a micro-simulation approach

Linked publications
DECANCQ Koen, VAN KERM Philippe.
Emerald Publishing Limited, 2019, coll. Research on Economic Inequality vol. 27, 208 p.
ARIP Muttaqien, O'DONOGHUE Cathal, SOLOGON Denisa.
Research on Economic Inequality, 2019, vol. 27, pp. 55-68.
ARIP Muttaqien, O'DONOGHUE Cathal, SOLOGON Denisa.
Asian-Pacific Economic Literature, 2019, vol. 33, n°2, pp. 44-61.
SOLOGON Denisa, ALMEIDA Vanda, VAN KERM Philippe
LISER, 2019, Working Papers n°2019-05, 52 p.