Showing papers in "Australian Economic Review in 2010"
TL;DR: The Household, Income and Labour Dynamics in Australia (or HILDA) Survey as discussed by the authors is Australia's first and only large-scale, nationally representative household panel survey, which is used to identify changes in the behaviour of the sample units being observed and quantify the magnitude of those changes.
Abstract: As described in previous data survey articles in this journal (Wooden, Freidin and Watson 2002; Watson and Wooden 2004), the Household, Income and Labour Dynamics in Australia (or HILDA) Survey, is Australia’s first and only large-scale, nationally representative household panel survey. Like all longitudinal surveys, the main purpose of the HILDA Survey is to identify changes in the behaviour of the sample units being observed (in this case, residents of a representative sample of private households) and, where possible, quantify the magnitude of those changes. This requires the repetitive collection over time, from the same sample members, of like, if not identical, measures of characteristics and behaviour. It might also be expected that the data collection procedures used should be replicated at each survey wave. Nevertheless, the process of survey administration and data collection is also affected by behaviours and changes in the real world. Individuals are not always cooperative and hence all panel surveys are confronted by sample attrition. At the other end of the spectrum, populations change due to births and immigration, raising questions about sample representativeness and thus the desirability of incorporating new sample members each survey wave to reflect these changes in the population. Very differently, changes in technology can have implications for the way surveys are administered. Finally, longitudinal surveys, especially those concerned with the measurement of human behaviour, need to be responsive to changes in both policy settings and in wider society, suggesting the need for survey content to gradually evolve over time. A good panel study can thus not remain static; it must evolve to reflect broader changes in society. With nine years of data collection behind it, the HILDA Survey is now a very different creature to the one originally conceived and implemented in 2001. The aim of this article is to provide an update on progress with the survey, including the evolution of the sample, changes in the way the survey is being administered, and the changing nature of the survey content.
62 citations
TL;DR: In this paper, the authors discuss the six principle instruments for taxing resource projects and evaluate these forms of taxation in relation to stability, neutrality and government revenue maximisation, and suggest a combination of instruments that is likely to establish a good balance among objectives.
Abstract: The Henry Review placed the taxation of rents from mines back on the national policy agenda. Mineral rent is potentially a source of neutral taxation. However, the various means of taxing resource rents in practice either fall short of the ideal of neutrality or collect for the revenue only a small proportion of the mineral rent. This article discusses the six principle instruments for taxing resource projects. It evaluates these forms of taxation in relation to stability, neutrality and government revenue maximisation. It suggests a combination of instruments that is likely to establish a good balance among objectives.
39 citations
TL;DR: In this article, the relationship between maternal age and child outcomes, using indices aimed at measuring overall outcomes, learning outcomes and social outcomes, was estimated, showing that children of older mothers have better outcomes.
Abstract: We estimate the relationship between maternal age and child outcomes, using indices aimed at measuring overall outcomes, learning outcomes and social outcomes. In all cases, we find evidence that children of older mothers have better outcomes. Not only do children born to mothers in their twenties do better than children born to teen mothers, but children born to mothers in their thirties do better than children born to mothers in their twenties. However, when we control for other socioeconomic characteristics, such as family income, parental education and single parenthood, the coefficients on maternal age become small and statistically insignificant. The only exception is an index of social outcomes, which is positively associated with maternal age, even controlling for socioeconomic factors. For cognitive outcomes, young motherhood appears to be a marker, not a cause, of poor child outcomes.
23 citations
TL;DR: In this article, the authors model the retirement behavior of Australian men and women aged between 55 and 70 years, where individuals retire in the period that the present value of their lifetime retirement income is maximised.
Abstract: In Australia, labour force participation among older people has been declining. Previous research has found that in many OECD countries, the retirement income system actually provides a financial incentive for older workers to retire early. In this article, we model the retirement behaviour of Australian men and women aged between 55 and 70 years, where individuals retire in the period that the present value of their lifetime retirement income is maximised. Our findings suggest that the Australian retirement system does provide an incentive to retire early. However, men are much more likely than women to respond to these financial incentives.
23 citations
TL;DR: In this paper, the authors show that from 2007, a simultaneous and sharp rise in new entrant plant capital costs and the cost of capital occurred, which disrupted a 7-year long equilibrium price, with average power system cost rising to $60/MWh.
Abstract: Australia has long been the beneficiary of low, stable power prices. A decade-long state of oversupply underpinned this result and while plant capital costs had been rising, the cost of capital had been declining. These offsetting effects locked the wholesale market into an average cost of $35–$40/MWh. However, from 2007, a simultaneous and sharp rise in new entrant plant capital costs and the cost of capital occurred. The combined effects crept up on the industry while it was in a state of oversupply. This ‘entry cost shock’ disrupted a 7 year long equilibrium price, with average power system cost rising to $60/MWh.
22 citations
TL;DR: In this paper, the effects of completing a Vocational Education and Training (VET) qualification on individual labour market outcomes, particularly on the probability of employment and on earnings, were provided for 1997, 2001 and 2005.
Abstract: We provide estimates of the effects of completing a Vocational Education and Training (VET) qualification on individual labour market outcomes, particularly on the probability of employment and on earnings. Estimates are provided for 1997, 2001 and 2005. The estimation methodology is based on matched comparisons of persons at each level of VET qualification among Year 12 completers and non-completers. We find that among Year 12 completers, there is little benefit from obtaining certificate level qualifications, but there are positive employment and earnings outcomes associated with obtaining diploma level qualifications. Among persons who did not complete Year 12, however, there are benefits from obtaining any kind of VET qualification, including the lower level Certificate I and II qualifications.
20 citations
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18 citations
TL;DR: In this article, the authors investigated the value of underground lowvoltage electricity and telecommunications networks to households by estimating the relationship between house prices and type of network service in three suburbs in Canberra, Australia.
Abstract: Underground low-voltage electricity and telecommunications networks have a number of advantages over overhead networks, including reliability of supply, safety and improved visual amenity. This article investigates the value of these benefits to households by estimating the relationship between house prices and type of network service in three suburbs in Canberra, Australia. Holding other house and neighbourhood characteristics constant, we find that underground networks increase house prices by 2.9 per cent. Although the electricity network in Canberra has some unusual features, this approach can provide valuable information to policy-makers considering undergrounding programs in residential areas.
17 citations
TL;DR: In this article, the authors proposed returning to more progressive individual taxation and universal family payments, for reasons of fairness and efficiency, in Australia's highly progressive, individual-based taxation of families has been replaced by a system that tends towards joint taxation with an inverted U-shaped rate scale.
Abstract: Over recent decades, Australia's highly progressive, individual-based taxation of families has been replaced by a system that tends towards joint taxation with an inverted U-shaped rate scale. The reform has been implemented by introducing family-income-targeted child payments (now Family Tax Benefit Part A) and by lowering tax rates on higher incomes. The new system has shifted the burden of taxation to two-earner families on low and average wages and, in particular, to working married mothers as second earners. For reasons of fairness and efficiency, we propose returning to more progressive individual taxation and universal family payments.
15 citations
TL;DR: The focus solely on income in the past not only reflected the view that this was the best indicator of the resources available to an individual, but also the practical consideration that it is typically easier to obtain household income information than information on other types of resources, or indeed on other (nonresource) dimensions of disadvantage as discussed by the authors.
Abstract: In recent times broader concepts of disadvantage have taken over from the more traditional ways of thinking about, and measuring, poverty. One approach is the social inclusion approach, which in its contemporary form has been predominantly conceived and implemented in Europe, and more recently has been taken up by governments in Australia (see, for example, Department of Prime Minister and Cabinet 2009). This approach explicitly acknowledges that socio-economic disadvantage, or social exclusion, is multidimensional in nature and therefore its extent, character, causes and consequences can be understood only by examining the range of dimensions of disadvantage or exclusion that are present. This multidimensionality poses a number of challenges for those that are interested in measuring the extent of exclusion in society. The focus solely on income in the past not only reflected the view that this was the best indicator of the resources available to an individual, but also the practical consideration that it is typically easier to obtain household income information than information on other types of resources, or indeed on other (nonresource) dimensions of disadvantage. In all developed countries, household income is regularly measured for representative samples of households, whereas most other dimensions are measured infrequently or not at all. Moreover,
15 citations
TL;DR: In this paper, the authors assess the effect of population ageing on housing consumption and house prices and find that the ageing of the population may cause average real house prices to be between 3 and 27 per cent lower than they otherwise would be over the period 2008-2050.
Abstract: This article assesses the effect of population ageing on housing consumption and house prices. Using two approaches, this article finds that the ageing of the population may cause average real house prices to be between 3 and 27 per cent lower than they otherwise would be over the period 2008–2050. The first approach is an econometric estimation of house prices for Australia over the period 1980–2008. The second approach is a simulation of a life cycle-optimising model with representative overlapping generations.
TL;DR: In this article, a heterogeneous firm model of trade of monopolistic competition was adopted to estimate the welfare gains due to country specialisation and the variety gains arising from trade integration in Asia.
Abstract: This article studies the variety gains of trade integration in Asia. Adopting a heterogeneous firm model of trade of monopolistic competition allowed us to estimate not only the welfare gains because of country specialisation, but also the variety gains arising from trade integration. The underlying structural parameters were estimated econometrically, based on a large panel of firm-level data for the Asian economies (ORIANA). Our empirical findings suggest that, when relaxing the assumption of firm homogeneity and accounting for export market entry costs, the gains from trade integration are higher than in conventional models with representative firms.
TL;DR: The authors examines six economic challenges: cap-and-trade versus taxes, non-price regulations, energy efficiency policies, mitigation versus adaptation, trade effects, and transmission planning, and concludes that climate policy is inherently redistributive and cannot be evaluated through cost-benefit analysis alone.
Abstract: Climate policy planners and the public should be aware of both economic challenges and arguments that may influence the intensity of the climate policies with which they have to cope. This article examines six economic challenges: cap-and-trade versus taxes, non-price regulations, energy efficiency policies, mitigation versus adaptation, trade effects, and transmission planning. Three additional challenges affect the end itself: ‘fat tails’, discount rates, and whether environmental protection should be evaluated by willingness to pay. If future generations cannot compensate the present for climate policy costs, climate policy is inherently redistributive and cannot be evaluated through cost–benefit analysis alone.
TL;DR: In this paper, the authors consider whether private saving in Australia behaves in a manner consistent with Ricardian equivalence, thus mitigating the effects of fiscal policy, or conversely, if fiscal policy has some ability to influence the real economy.
Abstract: Events surrounding the global financial and economic crises of 2008 and 2009 have sparked a renewed interest in discretionary fiscal policy. This article considers whether private saving in Australia behaves in a manner that is consistent with Ricardian equivalence, thus mitigating the effects of fiscal policy, or conversely, if fiscal policy has some ability to influence the real economy. Results indicate that, while there is not a full Ricardian response to changes in the fiscal stance, there is some partial offsetting behaviour—implying that fiscal policy does elicit some (limited) impact on economic activity.
TL;DR: This article examined the redistributive effects of direct taxes and transfers in New Zealand and found that different groups of low-income taxpayers can be affected quite differently by various aspects of the tax and transfer system in particular, reforms involving tax free zones do not appear to be well targeted to help those most in need.
Abstract: This article examines the redistributive effects of direct taxes and transfers in New Zealand First, it reports summary measures of the income tax-and-transfer system using the NZ Household Economic Survey Second, the article examines the characteristics of low-income NZ taxpayers A decomposition by individual and household characteristics shows that different groups of low-income taxpayers can be affected quite differently by various aspects of the tax-and-transfer system In particular, reforms involving tax-free zones do not appear to be well targeted to help those most in need
TL;DR: In this paper, the authors present claims that are just as real as a share of the share of all the claims made by a claim holder in a claim pool, and show that they are true.
Abstract: claims that are just as ‘real’ as a share of
TL;DR: This article examined the extent to which the Mortensen-Pissarides model of labour market search can quantitatively match business cycle fluctuations in Australia and found that the model fails to produce substantial volatility among unemployment or vacancies, a result similar to Shimer's (2005) findings for the United States.
Abstract: This article examines the extent to which the Mortensen-Pissarides model of labour market search can quantitatively match business cycle fluctuations in Australia. With productivity and job-separation-rate shocks, the model fails to produce substantial volatility among unemployment or vacancies, a result similar to Shimer's (2005) findings for the United States. Examining a broader range of shocks significantly increases the magnitude of business cycle fluctuations, but still only explains roughly 25 per cent of labour market volatility. The implied volatility of wages in the model is similar to that in the data and hence excessive wage flexibility is unlikely to be central to the failure of the model as claimed in the literature. ©2010 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research.
TL;DR: Saving through retained earnings is important for the corporate sector as a way of controlling debt in the financing of investment as discussed by the authors, and it allows households and governments to smooth consumption in the face of fluctuations in disposable income, such as when individuals retire because of old age or when governments foresee budget deficits because of an ageing population.
Abstract: Saving is important to households, governments and the corporate sector. It allows households and governments to smooth consumption in the face of fluctuations in disposable income. These fluctuations may be foreseen, such as when individuals retire because of old age or when governments foresee budget deficits because of an ageing population. Or they may be unforseen, such as the effects of the global financial crisis (GFC) of 2008-2009, which provides a precautionary motive for saving. Saving through retained earnings is important for the corporate sector as a way of controlling debt in the financing of investment.
TL;DR: Au-Yeung et al. as discussed by the authors showed that a large proportion of these unfunded liabilities are not expected to mature until after 2020, while some superannuation retirement benefits will be paid in the next few years.
Abstract: Up to 2005, most Australian public servants and the military received as a part of their remuneration a defined benefit superannuation payment in retirement1. At the time of employment, no funds were set aside for these future outlays. Rather, the payments were to bemet when required on a pay-as-you-go form from recurrent government expenditure. In effect, the government was building up unfunded liabilities, or borrowing from its current employees. In May 2007 these unfunded liabilities were estimated at around A$103 billion, or 10 per cent of a year’s GDP, and the liability is expected to grow to around A$148 billion by 2020 (Australian Government 2007). While some superannuation retirement benefits will be paid in the next few years, given the age distribution of expected retirements, a large proportion of these unfunded liabilities are not expected to mature until after 2020 (Au-Yeung et al. 2006). Financing these superannuation liabilities from recurrent funds as and when they are claimed is referred to as the business as usual (BAU) strategy.
TL;DR: In this article, the extent and character of technical change features prominently in discussions of productivity growth and movements in the competitiveness of manufacturing, but the overall rate of change, as measured by a rate of cost diminution, and the degree of bias towards saving labour, rather than capital or material, varies substantially across industries.
Abstract: In the modern era, the extent and character of technical change features prominently in discussions of productivity growth and movements in the competitiveness of manufacturing. While technical change is pervasive in modern manufacturing, it occurs unevenly. In this study, technical change is estimated by fitting dual cost functions for each of 38 sectors of Australian manufacturing over the 32 year period, 1968–69 to 1999–2000. The estimates show that technical change is heavily labour-saving in all industries, but that the overall rate of change, as measured by a rate of cost diminution, and the degree of bias towards saving labour, rather than capital or material, varies substantially across industries.