Wednesday, March 15, 2006

Australia's rich

The A.B. Atkinson and Andrew Leigh paper, The Distribution of Top Incomes in Australia (here) was released yesterday. The abstract:

Using taxation statistics, we estimate the income share held by top income groups in Australia over the period 1921-2002. We find that the income share of the richest fell from the 1920s until the mid-1940s, rose briefly in the post-war decade, and then declined until the early-1980s. During the 1980s and 1990s, top income shares rose rapidly. At the start of the twenty-first century, the income share of the richest was higher than it had been at any point in the previous fifty years. Among top income groups, recent decades have also seen a rise in the share of top income accruing to the super-rich. Trends in top income shares are similar to those observed among other elite groups, such as judges, politicians, top bureaucrats and CEOs. We speculate that changes in top income shares may have been affected by top marginal tax rates, skill-biased technological change, social norms about inequality, and the internationalisation of the market for English-speaking CEOs.

This is an important contribution. It has good documentation of earlier work and a careful analysis of measurement issues. It measures individual not household incomes and this seems to me a limitation. Those on low individual incomes will often be in families where both partners work. The distribution of household incomes has been flattened by high female workforce participation. On a positive note, I am also interested in evidence the authors provide of greater income inequality in Australia prior to 1950. We are more equal now than then.

But otherwise I will snoop and watch the press and other blogsites for discussion of this important piece of analysis. I will update this posting as I snoop.

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