Economic Inequality in Australia between 1983 and 2010: A Stochastic Dominance Analysis

Abstract

We employ stochastic dominance (SD) analysis on Australian unit records to investigate trends in inequality and relative welfare levels in Australia from 1983 to 2010. Using both income and expenditure distributions, we found that the economy was on a steady descent towards greater inequality between 1983 and 1993, and that this was followed by a 10-year period of recovery and growth, and gradual improvements in inequality levels. The economy's path to sustainable and equitable growth carried on towards the late 2000s, but this was interrupted by the 2007–08 global financial crisis which caused income inequality levels to deteriorate. Our SD tests show that the country's tax and transfer programmes have been consistent in moderating elevated levels of inequities observed in incomes over time, particularly in periods following economic contraction. Our subgroup results also show strong evidence of long-term disparities in the relative welfare levels of male-headed over female-headed households, of households with children over those without, and of couple-parents families over their single-parent counterparts.