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The Distributional Effects of Inflation in Australia 1980–1995
Author(s) -
Creedy John,
Van De Ven Justin
Publication year - 1997
Publication title -
australian economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.308
H-Index - 29
eISSN - 1467-8462
pISSN - 0004-9018
DOI - 10.1111/1467-8462.00012
Subject(s) - economics , inflation (cosmology) , inequality , differential (mechanical device) , income distribution , economic inequality , distribution (mathematics) , demographic economics , price level , econometrics , mathematics , macroeconomics , mathematical analysis , physics , theoretical physics , engineering , aerospace engineering
This paper examines the distributional effects of price changes in Australia over the period 1980 to 1995, using equivalent variations and equivalent incomes. The Linear Expenditure System is applied to each of a range of income groups rather than using a single set of parameters. The price changes are found to impose a relatively higher burden on lower income groups in some years, although in other years the higher income groups were affected relatively more. The distribution of equivalent incomes has the highest inequality in years of high overall inflation. However, the effects on inequality are low: the highest increase in inequality as a result of differential price changes is less than one per cent.