Working Paper 2/2019:
Risk aversion among Australian households
Authors:
Robert Breunig, Crawford School of Public Policy, Australian National University
Owen Freestone, Crawford School of Public Policy, Australian National University
Abstract:
This paper explores risk aversion among Australian households using panel data from the Household Income and Labour Dynamics in Australia (HILDA) survey. Using households’ share of risky assets, we test whether relative risk aversion is constant in wealth. After accounting for measurement error, we cannot reject the constant relative risk aversion (CRRA) assumption. Using an Euler equation that adjusts for measurement error in consumption data, we estimate the coefficient of relative risk aversion in the CRRA utility function. Point estimates from our preferred non-linear models suggest a moderate degree of risk aversion for the typical Australian household, with values ranging from 1.2 to 1.4. These findings can provide guidance for calibrating household preferences in macroeconomic models of the Australian economy.
The working paper is available here.
Working Paper 3/2019:
Author:
Sian Mughan, PhD Candidate, School of Public and Environmental Affairs, Indiana University – Bloomington
Abstract:
Higher levels of government motivate municipal consolidations as a tool to increase efficiency in the local government sector, yet research shows consolidations typically fail to deliver the promised spending reductions. Since mergers often require significant changes to institutional structures, one potential explanation is that local decision makers can substantially influence the outcomes of the consolidations process. To explore this possibility, this paper contrasts “encouraged but voluntary” mergers with those that were “forced” on local governments in the state of New South Wales, Australia. Results show voluntary mergers resulted in a ten percent decline in total per capita expenditures, but forced consolidations failed to reduce spending across the board. The policy conclusion is decision makers considering structural reform should invest in obtaining the support and participation of local government decision makers.
The working paper is available here.
Working Paper 4/2019:
Authors:
Chris Hoy, PhD Candidate, Australian National University
Russell Toth, Senior Lecturer, University of Sydney
Abstract:
Are differences in preferences for redistribution between right and left wing voters amplified because of misperceptions of inequality? To answer this question, we conduct a nationally representative, randomized survey experiment of 2,584 Australians in which respondents either received information about the level of national inequality and economic mobility, their position in the national income distribution, or no information. We show that both types of information about inequality lead to convergence in preferences for redistribution and charitable giving between right and left wing voters. The effect from the treatments are predominantly due to right wing voters becoming more progressive in their views.
The working paper is available here.
Working Paper 5/2019:
Tax progressivity in Australia: Facts, measurements and estimates
Authors:
Chung Tran, Research School of Economics, Australian National University
Nabeeh Zakariyya, Research School of Economics, Australian National University
Abstract:
We study the progressivity of Australia’s personal income tax system after the introduction of a New Tax System (Goods and Services Tax) Act 1999. We use two data sets: administrative data from Australian Tax Office (ATO) 2004-16 and survey data from the Household Income and Labour Dynamics in Australia (HILDA) survey 2001-16. We first document the distributions of income and tax liabilities, properties of the joint distributions of taxes paid and income, and discuss how taxes are varied across households and over time. We next provide estimates of tax progressivity using two approaches: one based on tax liability progression and one based on tax liability distribution relative to income distribution. The result obtained from the tax progression approach implies a significant decline in the average level of tax progressivity since 2004. Meanwhile, the result obtained from the tax distribution approach indicates a tax progressivity cycle with a modest decline up to 2006, then a sharp increase until 2010, and a slight decline thereafter. The personal income tax cuts for all taxpayers in early 2000s and the introduction of tax offset for low income earners (LITO) are main driving forces. Moreover, the evolution of income distribution and its interactions with bracket creep strongly affect the overall progressivity level of Australia’s income tax system. Hence, our findings provide new insights into the dynamics of income growth and tax progressivity, which has implications for tax policy debates in Australia.
The working paper is available here.
Recent Comments