Inequality in Australia 1983-2004: A Stochastic Dominance Approach

In this paper, we employ stochastic dominance analysis on Australian unit records to investigate trends in inequality and relative welfare levels in Australia over the period 1983 to 2004. We find that that when the stochastic dominance tests are applied to income and expenditure distributions for the entire population, net transfers to households do not appear to make any significant difference on the distribution of inequality existing for each year. However, when analysis is applied to particular population subgroups in the economy, the tests show that taxes and transfers do improve existing imbalances in the distribution of welfare. Our group results 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 singleparent counterparts. JEL CODES: C61, C81, J10, I31 * Hooi Hooi Lean Economics Program, School of Social Sciences Universiti Sains Malaysia + Corresponding author. Email address: [email protected] © 2012 Hooi Hooi Lean and Rebecca Valenzuela All rights reserved. No part of this paper may be reproduced in any form, or stored in a retrieval system, without the prior written permission of the author.