Australian inequality since world war II
Andrew Leigh
Kennedy School of Government, Harvard University
Contact Email:   andrew_leighksg02.harvard.edu

This paper is based on the following two papers:

Prior to the last three decades, regular surveys on household income were rare or non-existent in many developed countries, making it difficult for economists to develop long-run series on income distribution. Using taxation statistics, which tend to be available over a longer time span, I propose a method for imputing the incomes of non-taxpayers, and deriving the underlying distribution of income. Applying this method to Australia, I develop a new annual series for male inequality since 1941. Inequality among adult males fell during the 1950s and 1970s, and increased throughout the 1980s and 1990s - a pattern similar to the United Kingdom. On average, income taxation reduced the gini coefficient by 4 points, becoming substantially more progressive in the early-1970s.

Using an annual data series on inequality in Australia since 1941, six possible determinants of inequality are tested: unionisation, the minimum wage, immigration, trade, growth, and unemployment. To properly assess the impact of immigration and trade on the income distribution, new measures of the human capital of the average immigrant, and human capital embodied in imports, are developed. Granger causality tests suggest that in the short term (1-year lag), an increase in the minimum wages cause inequality to fall, while in the medium term (5-year lag), more unemployment causes inequality to rise. No evidence is found that higher rates of trade and immigration have a negative impact on inequality. There is some suggestive evidence that rising unionisation causes lower inequality.

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Paper78a.pdf Paper78b.pdf

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