Title

The long-run determinants of Australian income inequality

Date of this Version

3-2009

Document Type

Journal Article

Publication Details

Gaston, N., & Rajaguru, G. (2009). The long-run determinants of Australian income inequality. The economic record, 85(270), 260-275.

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2009 HERDC submission. FoR code: 1402

Copyright © 2009 The Economic Society of Australia

Abstract

Recent interest has been stimulated by the growth of income inequality in most developed countries during the 1980s and 1990s. However, considerable uncertainty still exists as to which factors have been the most important causes of this development. This article uses a measure of income inequality derived from taxation statistics and a recently proposed method for testing long-run Granger non-causality to examine the key determinants of Australia's inequality for the years 1970–2001. In line with popular concern, we find that globalisation and technological progress – defined as the global flow of information – has increased income inequality. In contrast, improved terms of trade have been equity-enhancing. Of the institutional determinants, de-unionisation has had an adverse effect on income inequality, whereas higher minimum wages have reduced it.

 

This document has been peer reviewed.