TY - JOUR
T1 - Policy, Demography, and Market Income Volatility
T2 - What Shaped Income Distribution and Inequality in Australia Between 2002 and 2016?
AU - Li, Jinjing
AU - La, Hai Anh
AU - Sologon, Denisa M.
PY - 2021/3
Y1 - 2021/3
N2 - 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.
AB - 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.
KW - ageing
KW - inequality decomposition
KW - policy reform
KW - STINMOD+
UR - http://www.scopus.com/inward/record.url?scp=85083052046&partnerID=8YFLogxK
U2 - 10.1111/roiw.12467
DO - 10.1111/roiw.12467
M3 - Article
SN - 0034-6586
VL - 67
SP - 196
EP - 221
JO - Review of Income and Wealth
JF - Review of Income and Wealth
IS - 1
ER -