Introducing the longitudinal MADIP and its role in understanding income dynamics in Australia

Abstract

Understanding the determinants, dynamics and distribution of income within a country is an area of ongoing research and policy interest. There is a lot we do know about income dynamics in Australia. However, we have limited information on several key aspects, including detailed information on the spatial dimensions of income inequality, income mobility in and out of the top of the distribution, sociodemographic characteristics at the top of the distribution, the top of the household income distribution, the impact of local geographic inequality and other characteristics on income change, and the complete income distribution of small subpopulations of particular policy interest. Our knowledge has been limited by a lack of data germane to these issues. The opening up of access to data from the Multi-Agency Data Integration Project (MADIP), including the Basic Longitudinal Extract 2011 (BLE2011), provides an opportunity to fill some of these research gaps. The aim of this paper is to begin the external validation of these data, with a particular focus on what the data can tell us about the distribution, dynamics and determinants of income in Australia. Our view is that the BLE2011 has the potential to shed new light on these aspects. However, analysis of the dataset should be done with caution, taking into account some key limitations, including incomplete linkage (which is likely to be nonrandom) and more limited income information for those who do not complete a tax return. These limitations notwithstanding, the BLE2011 and other datasets from MADIP should form an important part of the social science infrastructure in Australia.