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Macroeconomic variables and income inequality in New Zealand: An exploration using conditional mixture distributions

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  • Alex Bakker
  • John Creedy

Abstract

This paper explores a method of examining the effects of macroeconomic variables on the personal distribution of income over time. The approach involves modelling the complete distribution of income in each year using a conditional mixture distribution. The parameters of the distribution are specified as functions of the macroeconomic variables. The paper shows how comparative static analysis, involving the Atkinson inequality measure, can be performed. The method is applied to male New Zealand income distribution data for wage and salary earners over the period 1985 to 1994. It appears that cyclical variations in unemployment and GDP contributed substantially to the observed increase in inequality over the period 1987 to 1991 and the reduction in inequality during the years 1993 and 1994.

Suggested Citation

  • Alex Bakker & John Creedy, 1999. "Macroeconomic variables and income inequality in New Zealand: An exploration using conditional mixture distributions," New Zealand Economic Papers, Taylor & Francis Journals, vol. 33(2), pages 59-79.
    • Handle: RePEc:taf:nzecpp:v:33:y:1999:i:2:p:59-79
    DOI: 10.1080/00779959909544308
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    Cited by:

    1. John Creedy & Norman Gemmell & Loc Nguyen, 2018. "Income Inequality in New Zealand, 1935–2014," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 51(1), pages 21-40, March.
    2. Creedy, John & Gemmell, Norman & Nguyen, Loc, 2017. "Income inequality in New Zealand, 1935 – 2014," Working Paper Series 20253, Victoria University of Wellington, Chair in Public Finance.
    3. John Creedy & Jamas Enright & Norman Gemmell & Nick McNabb, 2008. "Equity and Efficiency Measures of Tax-Transfer Systems: Some Evidence for New Zealand," Treasury Working Paper Series 08/04, New Zealand Treasury.
    4. John Creedy & Norman Gemmell, 2004. "The Built‐In Flexibility Of Income And Consumption Taxes In New Zealand," Australian Economic Papers, Wiley Blackwell, vol. 43(4), pages 459-474, December.
    5. William E. Griffiths and Gholamreza Hajargasht, 2012. "GMM Estimation of Mixtures from Grouped Data:," Department of Economics - Working Papers Series 1148, The University of Melbourne.
    6. Papps, Kerry L., 2004. "Income Inequality and Gender in New Zealand, 1998-2003," IZA Discussion Papers 1365, Institute of Labor Economics (IZA).
    7. John Creedy & Norman Gemmell & Loc Nguyen, 2018. "Income Inequality in New Zealand, 1935–2014," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 51(1), pages 21-40, March.
    8. Des O'Dea, 2000. "The Changes in New Zealand's Income Distribution," Treasury Working Paper Series 00/13, New Zealand Treasury.
    9. John Creedy & Norman Gemmell, 2007. "Modelling Behavioural Responses to Profit Taxation: The Case of the UK Corporation Tax," Department of Economics - Working Papers Series 998, The University of Melbourne.
    10. A. B. Atkinson & Andrew Leigh, 2005. "The Distribution of Top Incomes in New Zealand," CEPR Discussion Papers 503, Centre for Economic Policy Research, Research School of Economics, Australian National University.

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