The Cambridge Handbook of the Social Sciences in Australia

By Ian McAllister; Steve Dowrick et al. | Go to book overview
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Chapter 7
Income Distribution and
Peter Saunders

The study of how income is distributed and redistributed has traditionally been accorded a relatively low priority among economists. Reviewing the topic for the Academy of the Social Sciences, Richardson (1979:11) noted that the literature up to that point was 'diverse and on the whole fragmented', focusing largely on the distribution of full-time male adult earnings. A similar sentiment was expressed by the Commonwealth Taxation Review Committee (1975), which made reference to the absence of reliable data on the distributions of income before and after tax on which to base analysis of the distributional impacts of the tax system (Commonwealth Taxation Review Committee 1975:4.32). Yet throughout this period, Australia was widely regarded, nationally and internationally, as among the most equal of nations in terms of economic outcomes (Sawyer 1976).

This lack of interest in income distribution among economists has not been restricted to Australia. In his 1996 presidential address to the Royal Economic Society, Atkinson (1997) quoted Hugh Dalton, who noted in 1920 that the distribution of income between persons was rarely discussed in economics textbooks, primarily because of the belief that it involved; 'plodding statistical investigations, which professors of economic theory were content to leave to lesser men' (quoted in Atkinson 1997:297).

Over the past three decades, this situation has undergone a remarkable turnaround. Improvements in data quality and accessibility have given researchers the opportunity to explore the implications of alternative assumptions and examine how income distributions differ.These developments have challenged Australia's egalitarian reputation, because the emergence of growing income disparities has drawn attention to the extent and causes of income inequality and what governments could, and should, do about it. While many have argued that increased inequality has been an unavoidable consequence of globalisation, others have argued that national factors lie behind the increased income disparities that many countries have experienced.Thus, Treasury Secretary Ken Henry has argued that 'economic globalisation may be impacting on national income distributions, but these are overwhelmingly determined by what are essentially nationally-driven developments' (Henry 2002:4).

Although the measurement of income distribution remains dominated by economists, understanding how patterns of inequality emerge and studying the economic and


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