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The Long‐run Determinants of Australian Income Inequality *
Author(s) -
GASTON NOEL,
RAJAGURU GULASEKARAN
Publication year - 2009
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/j.1475-4932.2009.00539.x
Subject(s) - economics , economic inequality , income inequality metrics , inequality , income distribution , equity (law) , granger causality , globalization , causality (physics) , labour economics , demographic economics , econometrics , mathematics , market economy , mathematical analysis , political science , law , physics , quantum mechanics
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.