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This paper provides an empirical analysis of annual income and expenditure inequality in New Zealand over a thirty-year period from the early 1980s. The extent of redistribution through the tax and benefit system is also explored. Household Economic Survey data are used for each year from 1983/84 to 1997/98 inclusive, 2000/01 and 2003/04 , and for each year from 2006/07. Survey calibration methods are used to examine income and expenditure inequality on the assumption that a range of (approximately 50) population characteristics remain constant over the period. Furthermore, decomposition methods are used to examine the separate contributions to changing inequality of population ageing, changes in labour force participation and household structure.
We are grateful to colleagues for comments during a Treasury seminar, and Polly Vowles, Kristie Carter and Nicolas Herault for comments on an earlier draft.
The views, opinions, findings, and conclusions or recommendations expressed in this Working Paper are strictly those of the author(s). They do not necessarily reflect the views of the New Zealand Treasury or the New Zealand Government. The New Zealand Treasury and the New Zealand Government take no responsibility for any errors or omissions in, or for the correctness of, the information contained in these working papers. The paper is presented not as policy, but with a view to inform and stimulate wider debate.
Table of Contents
- Executive Summary
- 1 Introduction
- 2 Welfare Metric and Unit of Analysis
- 3 Inequality over Thirty Years
- 3.2 Inequality and 'Social Welfare'
- 4 Changing Population Structure
- 5 Backward and Forward Looking Profiles
- 5.1 Alternative Profiles
- 5.2 Empirical Results
- 6 Inequality Decompositions
- 6.1 The Decomposition Method
- 6.2 Contributions to Inequality Changes
- 7 Conclusion
- Appendix A: Alternative Metrics and Distributions
- Appendix B: Comparisons with Earlier Results
- Appendix C: Survey Calibration
- Appendix D: Decomposing Changes: Further Details