Policy, demography and market income volatility: What was shaping income distribution in Australia between 2002 and 2016?

Jinjing Li, Hai Anh La, Denisa Sologon

Research output: Working paper

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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, on the other hand, have had a moderate impact on reducing inequality overall, but a more critical role for lower income earners.
Original languageEnglish
PublisherLISER
Number of pages46
Publication statusPublished - 30 Jan 2019

Publication series

NameWorking Papers
PublisherLISER
No.2019-02
ISSN (Electronic)2716-7445

Keywords

  • Income inequality
  • inequality decomposition
  • STINMOD+
  • policy reform
  • market income
  • ageing

LISER Collections

  • Les working papers du Liser

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