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By Andrew Leigh


The Australian results shown in this paper use confidentialized unit record data from the Household, Income and Labour Dynamics in Australia (HILDA) survey. Researchers using HILDA are required to acknowledge that the HILDA Project was initiated and is funded by the Commonwealth Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) and is managed by the Melbourne Institute of Applied Economic and Social Research (MIAESR), and to note that the findings and views reported in this paper are those of the author and should not be attributed to either FaHCSIA or the MIAESR. I am grateful to Bruce Headey and Mark Wooden for advice on HILDA income measures, to Rolande Laterreur Saumier of Statistics Canada for his assistance in using the Canadian data, and to Fred Argy, Hielke Buddelmeyer, John Pencavel, Daniel Ploetzl, and participants at A common critique of most measures of income inequality, which are based on a single year's income, is that they fail to take account of income mobility. If income fluctuations are large, and individuals can smooth consumption, then high inequality and high mobility may be no worse than low inequality and low mobility. To test this, I use panel data from four countries – Australia, Britain, Germany and the United States – and estimate measures of permanent income inequality that are based on income averaged over multiple years. I find that: (1) using pre-government income, annual inequality and permanent inequality have grown in Germany and the US, while post-government income inequality has grown in the US; (2) comparing levels of annual post-government income inequality across countries, the ranking was th

Year: 2009
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