ANU Centre for Economic Policy Research (CEPR)

Permanent URI for this collectionhttps://hdl.handle.net/1885/113892

The Centre for Economic Policy (CEPR) began in the Research School of Social Sciences at ANU in 1980, at the initiative of the late Professor Fred Gruen. It was founded on account of a major gap in Australian universities between research and economic policy debate. CEPR was the first institution in Australia to seek to bridge this gap, and continues to inform sound research-led policy.

CEPR Discussion Papers

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Open Access
A Microfoundation for Increasing Returns in Human Capital Accumulation and the Under-Participation Trap
(Centre for Economic Policy Research (CEPR), Research School of Social Sciences, The Australian National University, 2006-12) Booth, Alison L; Coles, Melvyn
This paper considers educational investment, wages and hours of market work in an imperfectly competitive labour market with heterogeneous workers and home production. It investigates the degree to which there might be both underemployment in the labour market and underinvestment in education. A central insight is that the ex-post participation decision of workers endogeneously generates increasing marginal returns to education. Although equilibrium implies underinvestment in education, optimal policy is not to subsidise education. Instead it is to subsidise labour market participation which we argue might be efficiently targeted as state provided childcare support.
Open Access
Agriculture, Developing Countries, And The World Trade Organization Millennium Round
(Centre for Economic Policy Research (CEPR), The Australian National University) Anderson, Kym
The potential welfare gains from further liberalizing agricultural markets are huge, both absolutely and relative to gains from liberalizing textiles or other manufacturing, according to GTAP modeling results. Should attempts to liberalize farm trade in the next WTO round follow the same pattern as the Uruguay Round, or might a more radical approach be required to bring agriculture more into the WTO mainstream? The present paper explores this question from the viewpoint of developing countries by focusing especially on the Uruguay Round's dirty tariffication and adoption of tariff rate quotas. It also examines new agricultural issues, notably one on the demand side (food safety) and one on the supply side (agriculture's so-called multifunctionality), both of which have important implications for developing countries' trade. Options facing developing countries are explored in the final section, where it is suggest the new millennium round offers an opportunity for those countries to be pro-active and take the high ground in demanding faster reform of both farm and textile trade in return for their own opening up.
Open Access
An Australian housing model
(Canberra : Australian National University, Centre for Economic Policy Research, 1982-12) Williams, Ross A.
Open Access
Australian higher education financing: issues for reform
(Canberra, ACT: Centre for Economic Policy Research (CEPR), The Australian National University) Chapman, Bruce
The paper documents the recent history of higher education financing in Australia. It is argued that there have been radical changes to financing arrangements over the last 12 years or so, which have taken the form of the imposition and increase in student charges. Contributions from students are justified, and the collection mechanism used in Australia is argued to be the best arrangement: income contingency. A major part of the paper takes up this theme through the comparison of the economic and social consequences of different financing arrangements involving student charges. It is argued that bank loans and/or scholarship systems with up-front fees are necessarily inferior to arrangements that take into account a former student’s future capacity to pay. The HECS – or similar income contingent policies – are argued to be the only way to go. It is also argued that the Australian higher education financing system is in need of reform. The issues documented include: relative academic salaries have fallen significantly over the last two decades; enterprise bargaining is a poor collective bargaining instrument for public sector universities; and, there is a need for some institutional price flexibility. Even so, it is pointed out that unfettered price flexibility for Australian universities is undesirable, for two reasons. The first is that there have been many years of public subsidy for the well-established institutions, and the second is that these same institutions have considerable real estate benefits from their propitious geographic locations. Both issues necessarily mean that allowing full charge discretion will deliver considerable and unfair rents to the most advantaged institutions and their contemporary staff. However, a case for limited price flexibility is offered. The potential benefits are the encouragement of increased competition and to allow additional revenue. It is stressed that it is critical that policy reform along these lines should necessarily involve income contingent repayment, and it is explained how this might work. The final part of the paper analyses the Government’s recently announced plan to allow Postgraduate students the option of paying their charge with an income contingent loan. That is, HECS is to be extended to Postgraduate study. It is argued that, in principle, this is an excellent reform of higher education financing arrangements. The scheme is not, however, straightforward. Because HECS has a zero real rate of interest, the new scheme means that there will be a significant level of subsidy for both students and universities, and the extent of the subsidy is illustrated for a range of different student circumstances. An implication of these subsidies is that, eventually, the Government will very likely impose changes. It is argued that the worst possible reform would be to cap levels of student borrowing through HECS. A much better solution would be to offer a discount for up-front payment of postgraduate charges.
Open Access
Back-to-front Down-under? Estimating the Part-time/Full-time Wage Differential over the Period 2001-2003
(Centre for Economic Policy Research (CEPR), Research School of Social Sciences, The Australian National University, 2006-05) Booth, Alison L; Wood, Margi
In 2003, part-time employment in Australia accounted for over 42% of the Australian female workforce, nearly 17% of the male workforce, and represented 28% of total employment. Of the OECD countries, only the Netherlands has a higher proportion of working women employed part-time and Australia tops the OECD league in terms of its proportion of working men who are part-time. In this paper we investigate part-time full-time hourly wage gaps using important new panel data from the first four waves of the new Household, Income and Labour Dynamics in Australia Survey. We find that, once unobserved individual heterogeneity has been taken into account, part-time men and women typically earn an hourly pay premium. This premium varies with casual employment status, but is always positive, a result that survives our robustness checks. We advance some hypotheses as to why there is a part-time pay advantage in Australia.
Open Access
Back-to-front down-under? Part-time/full-time wage differentials in Australia
(Canberra, ACT: Centre for Economic Policy Research (CEPR), The Australian National University) Booth, Alison L; Wood, Margi
In 2003, part-time employment in Australia accounted for over 42% of the Australian female workforce, nearly 17% of the male workforce, and represented 28% of total employment. Of the OECD countries, only the Netherlands has a higher proportion of working women employed part-time and Australia tops the OECD league in terms of its proportion of working men who are part-time. In this paper we investigate part-time fulltime hourly wage gaps using important new panel data from the new Household Income and Labour Dynamics in Australia Survey. We find that the usual negative part-time wage penalty found in other countries is not found in Australia once unobserved individual heterogeneity has been taken into account. Instead, part-time men and women typically earn an hourly pay premium. This result survives our numerous robustness checks and we advance some hypotheses as to why there is a positive part-time pay premium.
Open Access
Bargaining Over Labor: Do Patients have any Power?
(Centre for Economic Policy Research (CEPR), Research School of Social Sciences, The Australian National University, 2006-07) Gans, Joshua S; Leigh, Andrew
Using data on births from Australia, we estimate the level of patient bargaining power in negotiations over birth timing. In doing so, we exploit the fact that parents do not like to have children born on the “inauspicious” dates of February 29 and April 1. We show that, in general, the birth rate is lower on these dates, and argue that this reflects parent preferences. When these inauspicious dates abut a weekend, this creates a potential conflict between avoiding the inauspicious date, and avoiding the weekend. We find that in approximately three-quarters of cases, this conflict is resolved in favor of the physician. This suggests that while doctors have more power than patients, patients are sometimes able to influence medical decisions for non-medical reasons.
Open Access
Born on the First of July: An (Un)natural Experiment in Birth Timing
(Canberra, ACT: Centre for Economic Policy Research (CEPR), Research School of Social Sciences, The Australian National University, 2006-07) Gans, Joshua S; Leigh, Andrew
It is well understood that government policies can distort behaviour. But what is less often recognized is the anticipated introduction of a policy can introduce its own distortions. We study one such “introduction effect”, using evidence from a unique policy change in Australia. In 2004, the Australian government announced that children born on or after July 1, 2004 would receive a $3000 “Baby Bonus.” Although the policy was only announced a few months before its introduction, parents appear to have behaved strategically in order to receive this benefit, with the number of births dipping sharply in the days before the policy commenced. On July 1, 2004, more Australian children were born than on any other single date in the past thirty years. We estimate that over 1000 births were “moved” so as to ensure that their parents were eligible for the Baby Bonus, with about one quarter being moved by more than two weeks. Most of the effect was due to changes in the timing of inducement and caesarean section procedures. This birth-timing event represents a considerable opportunity for health researchers to study the impact of planned birthdays and hospital management issues.
Open Access
By Chance or Choice: The Regulation of the Apprenticeship System in Australia, 1900-1930
(Centre for Economic Policy Research (CEPR), Research School of Social Sciences, The Australian National University, 2006-09) Stromback, Thorsten
This paper traces the process whereby the apprenticeship system came to be regulated by industrial tribunals during the period 1900 to 1930. It describes how the regulation emerged, the motives that underpinned it, and the wider political debate about the apprenticeship system at the time. It then goes on to assess the effect of this regulation. This assessment is informed by an underlying theoretical perspective and draws on the contemporary debate and the outcomes that can be observed. While the question of primary interest is the efficiency of the regulatory regime that emerged, broader considerations are invoked. What was set in place in the early part of the 20th century has continued to shape the how the apprenticeship system has developed since then. For that reason, the future development of the apprenticeship system may be a more relevant indicator of outcomes than the contemporary facts.
Open Access
A Comparative Analysis of the Nativity Wealth Gap
(Canberra, ACT: Centre for Economic Policy Research (CEPR), The Australian National University) Bauer, Thomas K; Cobb Clark, Deborah A; Hildebrand, Vincent A; Sinning, Mathias
This paper investigates the source of the gap in the relative wealth position of immigrant households residing in Australia, Germany and the United States. Our results indicate that in German and the United States wealth differentials are largely the result of disparity in the educational attainment and demographic composition of the native and immigrant populations, while income differentials are relatively unimportant in understanding the nativity wealth gap. In contrast, the relatively small wealth gap between Australian and foreign-born households, exists because immigrants to Australia do not translate their relative educational and demographic advantage into a wealth advantage. On balance, our results point to substantial cross-nationality disparity in the economic well-being of immigrant and native families, which is largely consistent with domestic labor markets and the selection policies used to shape the nature of immigration flow.
Open Access
Competing approaches to forecasting elections: economic models, opinion polling and prediction markets
(Canberra, ACT: Centre for Economic Policy Research (CEPR), The Australian National University) Leigh, Andrew; Wolfers, Justin
We review the efficacy of three approaches to forecasting elections: econometric models that project outcomes on the basis of the state of the economy; public opinion polls; and election betting (prediction markets). We assess the efficacy of each in light of the 2004 Australian election. This election is particularly interesting both because of innovations in each forecasting technology, and also because the increased majority achieved by the Coalition surprised most pundits. While the evidence for economic voting has historically been weak for Australia, the 2004 election suggests an increasingly important role for these models. The performance of polls was quite uneven, and predictions both across pollsters, and through time, vary too much to be particularly useful. Betting markets provide an interesting contrast, and a slew of data from various betting agencies suggests a more reasonable degree of volatility, and useful forecasting performance both throughout the election cycle and across individual electorates.
Open Access
Consumption and income inequality in Australia
(Canberra, ACT: Centre for Economic Policy Research (CEPR), The Australian National University) Barrett, Garry; Crossley, Thomas; Worswick, Christopher
It has been argued that consumption is a more appropriate measure of household well-being than income or earnings. Using four Household Expenditures Surveys collected by the Australian Bureau of Statistics between 1975 and 1993, we examine trends in consumption inequality among Australian households and compare consumption inequality with income inequality. We find that consumption is much more equal than income. Further, while both income and consumption inequality rose by statistically and economically significant amounts over the period covered by our survey, consumption inequality rose by much less. For example, the Gini coefficient for equivalent gross income inequality rose by 0.043 (17%) while the Gini coefficient for equivalent nondurable consumption rose by 0.019 (9%). We discuss possible interpretations for these differences. Through a series of specification checks we are able to rule out several ways in which the result might be spurious, or an artefact of our methodological choices. One interpretation of the results is that some income inequality in Australia reflects transitory fluctuations which households can smooth, and that some of the growth in income inequality over the study period reflects an increase in these transitory fluctuations.
Open Access
Crime, punishment and deterrence in Australia: an empirical investigation
(Canberra : Centre for Economic Policy Research, Australian National University, 1982, 1982) Withers, G. A. (Glenn Alexander), 1946-
Open Access
Deriving long-run inequality series from tax data
(Canberra, ACT: Centre for Economic Policy Research (CEPR), The Australian National University) Leigh, Andrew
Prior to the last three decades, regular surveys on household income were rare or nonexistent in many developed countries, making it difficult for economists to develop longrun series on income distribution. Using taxation statistics, which tend to be available over a longer time span, I propose a method for imputing the incomes of non-taxpayers, and deriving the underlying distribution of income. Because taxation statistics are typically disaggregated by gender, it is possible to derive separate income distribution series for men and women in countries where individuals file separately. I show that over the past four decades, the distribution of adult male incomes is a good proxy for the distribution of family incomes. Applying this method to Australia, I develop a new annual series for inequality from 1942-2000. Inequality fell in the 1950s and the 1970s, and rose during the 1980s and 1990s – a pattern similar to the United Kingdom.
Open Access
Developing equitable and affordable government responses to drought in Australia
(Canberra, ACT: Centre for Economic Policy Research (CEPR), The Australian National University) Chapman, Bruce; Botterill, Linda
Once again in 2002 Australian taxpayers are being called on to provide relief to drought-affected farmers. Under the National Drought Policy which has been in place since 1992, support is provided by the Commonwealth Government predominantly in two forms: interest rate subsidies to assist farm businesses and a special welfare payment, the Exceptional Circumstances Relief Payment. Support is available under these programs only to farmers in geographically defined areas which have been declared to be experiencing ‘exceptional circumstances’. This paper describes a number of problems with this approach and suggests an alternative form of drought relief based on the Higher Education Contribution Scheme, which is more equitable between farmers, less regressive in its impact on tax payers, and less open to politicisation.
Open Access
The distribution of top incomes in Australia
(Canberra, ACT: Centre for Economic Policy Research (CEPR), The Australian National University) Atkinson, A B; Leigh, Andrew
Using taxation statistics, we estimate the income share held by top income groups in Australia over the period 1921-2002. We find that the income share of the richest fell from the 1920s until the mid-1940s, rose briefly in the post-war decade, and then declined until the early-1980s. During the 1980s and 1990s, top income shares rose rapidly. At the start of the twenty-first century, the income share of the richest was higher than it had been at any point in the previous fifty years. Among top income groups, recent decades have also seen a rise in the share of top income accruing to the super-rich. Trends in top income shares are similar to those observed among other elite groups, such as judges, politicians, top bureaucrats and CEOs. We speculate that changes in top income shares may have been affected by top marginal tax rates, skill-biased technological change, social norms about inequality, and the internationalisation of the market for English-speaking CEOs
Open Access
Does Child Gender Affect Marital Status?
(Canberra, ACT: Centre for Economic Policy Research (CEPR), Research School of Social Sciences, The Australian National University, 2006-05) Leigh, Andrew
Pooling microdata from five Australian censuses, I explore the relationship between child gender and divorce. By contrast with the United States, I find no evidence that the gender of the first child has a significant impact on the decision to marry or divorce. However, among two-child families, parents with two children of the same sex are 1.7 percentage points less likely to be married than parents with a boy and a girl. Surveys of parental attitudes suggest that this effect is more likely to be driven by fathers than by mothers. This finding is not consistent with theories of preference for sons over daughters, differential costs, role models or complementary costs, but is consistent with a theory of parity preference.
Open Access
Does raising the minimum wage help the poor?
(Canberra, ACT: Centre for Economic Policy Research (CEPR), Research School of Social Sciences, College of Arts and Social Sciences, The Australian National University) Leigh, Andrew
What is the impact of raising the minimum wage on family incomes? Analysing the characteristics of low wage workers, I find that those who earn near-minimum wages are disproportionately female, unmarried and young, without post-school qualifications and overseas born. About one-third of near-minimum wage workers are the sole worker in their household. Due to low labour force participation rates in the poorest households, minimum wage workers are most likely to be in middle-income households. Using various plausible parameters for the effect of minimum wages on hourly wages and employment, I estimate the impact of a minimum wage rise on inequality.
Open Access
Does the Lunar Cycle Affect Birth and Deaths?
(Canberra, ACT: Centre for Economic Policy Research (CEPR), Research School of Social Sciences, The Australian National University, 2006-08) Gans, Joshua S; Leigh, Andrew
There is a commonplace notion that full moons affect natality and mortality. To test this theory, we obtain daily births and deaths data from Australia, covering all 10,592 days from 1 January 1975 to 31 December 2003. We find that full moons are not associated with any significant change in the number of conceptions, births, or deaths. Moreover, our standard errors are sufficiently tight to make it possible to rule out even modest positive or negative effects of the lunar cycle.
Open Access
Does the world economy swing national elections?
(Canberra, ACT: Centre for Economic Policy Research (CEPR), The Australian National University) Leigh, Andrew
Do voters reward national leaders who are more competent economic managers, or merely those who happen to be in power when the world economy booms? According to rational voting models, electors should parse out the state of the world economy when deciding whether to re-elect their national leader. I test this theory using data from 268 democratic elections held between 1978 and 1999, comparing the effect of world growth (“luck”) and national growth relative to world growth (“competence”). In the preferred specification, which allows for countries to have different degrees of global integration, an extra percentage point of world growth boosts incumbents’ chances of re-election by 9 percent, while an extra percentage point of national growth relative to world growth only boosts an incumbent’s chances of re-election by 4 percent. Voters are more likely to reward competence in countries that are richer and better educated. Controlling for income, higher rates of newspaper readership reduce the returns to luck, while higher rates of television viewing reduce the returns to competence.