Category Archives: Distributional Economics

Notes Towards the Distributional Consequences Of Policy Changes

This is a simplified version of a paper to the Joint Conference between the Social Welfare Research Centre of the University of New South Wales and the New Zealand Planning Council, 10-11 November 1988, published in the Proceedings edited by Peter Saunders and Adam Jamrozik, as SWRC Report No 78, September 1989. This version was…
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What Does the 2004 Living Standards Report Tell Us?

This was submitted to http://norightturn.blogspot.com/, posted 3 August, 2006.  Keywords: Distributional Economics; Social Policy; Statistics;  The New Zealand Living Standards 2004 report depends entirely upon its “Economic Living Standards Index” (ELSI), first used in the previous (2000) report. At that time I expressed reservations about the index. Many have not been addressed. What I do…
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Health Status and Income Inequality

This version was revised in March 2006.

Keywords: Distributional Economics; Health;

Introduction and Summary

This paper brings together some recent research about the relationship between health status and income inequality. It focuses upon a set of propositions which challenge the conventional wisdom. They are:

1. That in a rich country poverty – low material standard of living – probably does not directly impact on health, but does indirectly through stress which income differences generate.

2. The increase in household inequality in the period of the late 1980s and early 1990s was more due to changes in tax, benefit, and government spending policies than it was due to market liberalisation. However, the market liberalisation increased stress on New Zealanders.

3. There is some evidence that income inequality may be increasing, due to factors such as globalisation and technological change.

4. The most common poor New Zealand household is a couple with children who are of Pakeha ethnicity, who own their home (usually with a mortgage), and who depend upon wages for their main income. There are other groups who have higher incidence of poverty, but because they are smaller they do not involve as many people. This means that effective poverty eradication involves working on a broad front rather than targeting minority groups.

5. Illness does not correlate well with income, unless age is controlled for. The sick in New Zealand are the elderly, although the paper goes on to argue that policies aiming to reduce poor health in the long term need to target those with low incomes and low in the socioeconomic status hierarchy.

Rabin’s Law

Someone (almost) always suffers when a new policy improves the lot of others.

Listener: 27 August, 2005.

Keywords: History of Ideas, Methodology & Philosophy;

Matthew Rabin is a wonderfully eccentric economist. His University of California at Berkeley website is littered with jokes. But his research on how we behave economically is some of the most interesting being done today, promising the 42-year-old a deserved economics prize in honour of Alfred Nobel.

The Econometrics Of Household Equivalence Scales

Paper to the Wellington Statistics Group (WSG), 11 February, 2004.

Keywords: Distributional Economics; Statistics;

Contents
1. Claudio Michelini
2. Household Equivalence Scales
3. Characterising Equivalence Scales
4. Available Scales
5. Which Scale Should We Use?
6. Which Scale Do We Use?
7. A Simple Econometric Procedure
8. The Michelini Scale
9. Conclusion

Distributional Economics: Index

Research (Indexes)

The Economic and Health Status of Households Project (Index)
Household Equivalence Scales (Index)

Research (Articles)

Beware the Median (May 2002)
Income Distribution and Equity (August 1999)
What Has Happened in New Zealand to Income Distribution and Poverty Levels (July 1999)
Globalization and A Welfare StateChapter 3: The Progress of Poverty & Chapter 7: Thinking Systematically About Poverty (December 1997)
Income Distribution: Part I and Income Distribution: Part II (January 1996)
Poverty in New Zealand – 1981 to 1993 (November 1995)
The Fallacy of the Equity vs Efficiency Tradeoff. (June 1995)
Properly Assessing Income Adequacy in New Zealand (January 1995)
There are a number of earlier research papers, notably Income Distribution in New Zealand 1983 (Book not on website).

Other Relevant Pages concerned with the policy implications

Family Policy (Index)
Globalization and A Welfare State (Index)
The Commercialisation of New Zealand Chapter 3 ‘The Abandoning of Equity’ (July 1997)

Listener Columns (Miscellaneous)

Closing the Gaps: Policy Or Slogan? (November 2000)
In the Midst of Plenty (December 1985)

The Economic and Health Status Of Households Project (Index)

Keywords: Distributional Economics; Health; Statistics; Social Policy

This is a project by Suzie Ballatyne and myself based on the Household Survey, which enabled us to look at some of the relationships between health and economic status.

Executive Summary

A preliminary account of the research program is
Economic Status and Health Status Project

Two papers which report some of the findings are
Validation and the Health and Household Economy Project
and
Who Goes to the Doctor?

The final report, The Economic and Health Status of Households is available on request. Its Executive Summary is on this website, and so is Chapter 6,
Choosing Household Equivalence Indexes

Index of Distributional Economics
Index of Household Equivalence Scales

Validation and the Health and Household Economy Project

Paper to the Wellington Health Economists Group, Thursday 29 November, 2002.(1)

Keywords: Distributional Economics; Health; History of Ideas, Methodology & Philosophy; Statistics;

Introduction.

This is a brief summary of a 100 plus page report, The Economic and Health Status of Households,(2) prepared by Suzie Ballantyne and myself. The data base was the Household Economic Survey (HES). For the three year period covering 1994/5-1996/7 the HES included questions on the respondents’ recent utilisation of health services together with as a subjective assessment of each’s health status, as well as socioeconomic variables such as income and expenditure and personal characteristics.

Economic Reforms: Index

History
Sequencing (December 1983)
Freeze and Thaw
(July 1984)
Ssh …It’s the Big ‘‘D’’ (August 1984)
Confidentially Yours (August 1984)
Devaluation!: Five Turbulent Days in 1984 and Then … (July 1985)

Economic Liberalisation: Where Do People Fit In?
(May 1987)

From Run to Float: the Making of the Rogernomics Exchange Rate Policy (September 1989)
Liberalization Sequencing: The New Zealand Case (December 1989)

Towards A Political Economy of New Zealand: the Tectonics of History (October 1994)
The Wild Bunch?: An Inquiry is Needed to Restore Treasury’s Integrity (August 1996)
The Great Diversification: Ch 9 of Globalization and a Welfare State (December 1997)
The State Steps In: Michael Bassett Makes A Case for Intervention. (August 1999)
Remaking New Zealand and Australian Economic Policy by Shaun Goldfinch (August 2001)
The Treasury and the Nationbuilding State (December 2001)

Evaluation
New Zealand’s Economic Performance This is an Index
Economic and Other Ideas Behind the New Zealand Reforms
(October 1994)
For Whom the Deal Tolls (Of Dogma and Dealers) (August 1996)
The Economic Impact of the Employment Contracts Act (October 1997)
Microeconomic Reform: The New Zealand Experience (February 1998)
Some Macroeconomics of the Employment Contracts Act (November 1998)
View From Abroad: What Do We Know about Economic Growth? (May 1999)
The Model Economist: Bryan Philpott (1921-2000) (August 2000)
Comparison with Australia: New Zealand’s Post-war Economic Growth Performance (August 2002)

The Debate
Waist Deep in the Big Muddy? (February 1991)
Friends in High Places: Rogernomic Policies Have Powerful Allies in Australia (April 1994)
Systemic Failure (December 1995)
Ignoring the Critics (February 1997)
A Permanent Revolution? (March 1997)
In the Dark: The State of Research Into the Economy is An Embarrassment (June 1997)
The New Zealand Experiment: A Model for World Structural Adjustment? (Review) (July 1997)
Out of Tune: Even the Officials Admit the Health Reforms Were Fatally Flawed. (December 1997)
Money for Jams: the Government Response to Roading Reforms is Commercialisation. (January 1998)
Reforms, Risks, and Rogernomics (March 1999)
The London Economist and the New Zealand Economy (December 2000)
Locked Out: of Free Press and Free Economics (May 2001)
A Surplus of Imitation (June 2001)
Government Spending and Growth Rates: A Methodological Debate (January-May 2002)
From Pavlova Paradise Revisited by Austin Mitchell (July 2002)
Manure and the Modern Economy: Has Economic Policy Hardly Changed? (September 2002)
From is This As Good As it Gets? (December 2002)
1999 and All That (January 2004)

Books
The Commercialisation of New Zealand (1997)
In Stormy Seas: the Post-war New Zealand Economy (Chapters 15-16) (1997)
The Whimpering of the State: Policy After MMP (1999)

The Economic and Health Status Of Households

Report by Brian Easton & Suzie Ballantyne, Wellington School of Medicine

Keywords: Distributional Economics ; Statistics;

This report contains the contents and executive summary only. Copies of the report (with its numerous tables) are available on request from Brian Easton. Some tables are in Validation and the Health and Household Economy Project

For an introduction to method see The Economic and Health Status Project

Contents
Executive Summary Below

Chapter 1: Introduction (page 8)
Chapter 2: Measures of Health Status (page 11)
Chapter 3: Adjusting Household Income for Housing Circumstances (page 24)
Chapter 4: The Utilisation of Health Care Services (page 35)
Chapter 5: The Determinants of Private Spending on Health Care (page 44)
Chapter 6:
Choosing Household Equivalence Indexes
(page 52)
Chapter 7: The Household Distribution of Income (page 76)
Chapter 8: The Household Distribution of Income Adjusted for Housing Circumstances (page 84)
Chapter 9: The Location of Health Status in the Income Distribution (page 92)
Chapter 10: Conclusion. (page 97)

Household Equivalence Scales

This is Chapter 6, written jointly with Suzie Carson, from The Health and Economic Status of Households. The appendices are not published, and the acknowledgement to Claudio Michelini has been published separately. Even so website presentational requirements have led to some changes – and perhaps infelicities. The full chapter is available from the authors.

Keywords: Distributional Economics; Statistics;

Introduction

The (disposable) income of a household has to be adjusted for the composition of the household, the numbers and ages of those who belong to it, if we want to make useful comparisons of the standard of living of different households, or to predict commonalities of their behaviour such as expenditure patterns. A simple adjustment might be to convert the income to a per capita basis, but that ignores the impact of household economies of scale and for the different characteristics of the inhabitants. It is not true that ‘two can live as cheaply as one’, but two living together are likely to spend less than if they live separately in order to attain the same standard of living. It also seems reasonable to postulate (and the research evidence supports) that different ages have different needs. Other relevant factors might be gender, employment status(for employed people may have outlays that the not-employed do not have, such as on transport to work), and marital status (since a couple may have expenditure savings relative to two singles living in the same house).

Family Policy: Index

What are Mothers Worth? (March 1979)
Fences and Ambulances: An Economist Looks at Family Policy (July 1992)
Suffer the Children (November 1993)
Approaching Family Economic Issues: Holistically or Pathologically? (October 1994)
Family Policy: Creative or Destructive? (November 1994)
The External Impact on the Family Firm (March 1996)
Review of Children of the Poor (April 1997)
Household Gods: Whatever Politicians Say, Children Interests Are Ignored (October 1997)
You’re on Your Own: the Nanny State Becomes A Hard Taskmaster (March 1998)
Poor Children (February 2001)
Is This a Healthy Budget for New Zealanders? (May 2002)
Family Policy and Family Support (September 2002)
Notes on a Commission for the Family (September 2002)
Children and their parents are the largest group of the poor (November 2002)
Treat the Kids: Why Michael Cullen Should Blow A Bit of the Budget Surplus (May 2003)
Spending the Public Growth Dividend: Why Was There So Little for Children? (May 2003)

Index of Distributional Economics

Index of The Economic and Health Status of Households Project

Also see the New Zealand Child Poverty Action Group

Family Poverty and Family Support: a Strategy for the Next Three Years.

Address to the Wellington People’s Forum, 7 September 2002.

Keywords: Distributional Economics; Social Policy.

There is one main fact about poverty in New Zealand, which often gets lost behind a myriad of minor facts, which diverts us from the central issue. The consequence is that attempts to reduce poverty are at best inefficient, and at worst ineffective. That central fact is a substantial majority of the poor are children and their parents. This predominance of children and those who care for them is independent of the choice of poverty line. But to give an illustration, if we use the poverty line based on the deliberations of the 1972 Royal Commission on Social Security – the standard poverty line in the last thirty years – we find at least three-quarters of the poor are children and their parents. It is more than four fifth if we adjust for the more expensive housing that families with children face. Even those figures of 75 percent and 80 percent are under-estimates, if we note that in some households in which there are children there are adults other than their parents. The salient feature of poverty in New Zealand is that it is dominated by households with children in them.

Is This a Healthy Budget for New Zealanders?

Presentation to a Post-budget Breakfast Seminar sponsored by the PHA (24 May)

Keywords: Distributional Economics; Social Policy

The Child Poverty Action Group is an Auckland based group committed to addressing the economic and associated difficulties that children and their families face. It is grateful for the invitation from the Public Health Association to speak to you. Susan St John, their economic adviser, who has a sterling record in this area, asked me to make a presentation on her behalf. I am going to briefly summarise some of Susan’s recent work, reported in a paper Financial Assistance for the Young: New Zealand’s incoherent welfare state. Then at the end of a short presentation on an enormous and very important topic, add a couple of comments of my own.

Beware the Median

SPRC Newsletter No 82, November 2002, p.6-7.

Keywords: Distributional Economics; Social Policy

In their article Beware the Mean!, Peter Saunders and Tim Smeeding argue that median household is a superior reference point for establishing a poverty line than mean household income, concluding ‘Put bluntly, the use of a poverty line linked to mean poverty income produces excessively high poverty rates that tend to increase by more when poverty is rising but to fall by less when poverty is falling.’ The purpose of this note is to demonstrate that poverty lines based on a fixed proportion of the median income are subject to a fatal flaw, illustrating the consequences of the flaw with recent New Zealand experiences.

Who Goes to the Doctor?

Overheads for a presentation to an Independent Practitioners’ Association Seminar, April 2002.

Keywords: Distributional Economics; Health;

*******

This work comes from a report on research being prepared by Brian Easton and Suzie Ballantyne.

This research arises from a limited grant from the Health Research Council.

It uses Statistics New Zealand data. However they only provided the data, and the results presented in this study are the work of the author, not Statistics New Zealand.

The data is based on unit records from the Household Economic Survey for the three years between 1994/5 to 1996/7. Access to the data used in this study was provided by Statistics New Zealand in a secure environment designed to give effect to the confidentiality provisions of the Statistics Act 1975.

Poor Children: the Government Has Not Attended to the Child Poverty Problem

Listener 3 February, 2001

KeywordsDistributional Economics; Social Policy

Possibly the best established finding of twenty-five years of research on poverty is that children are disproportionately among the poorest of the nation. Not just brown children or yellow children or white children. Not just one parented children or two parent children. Just children. Over 30 percent of all children under the age of 15 are in the bottom fifth of the population by income. That means that over half the poor are children and their parents, and their rate of poverty is almost double the rate for the childless.

The Economic Status and Health Status Project

By Suzie Carson & Brian Easton

New Zealand Journal of Social Policy December 2000, p.121-128. Based on a paper presented to the 1999 Conference of the New Zealand Statistical Association, Wellington, July 5-7.

Executive Summary

The increasing use of the Household Economic Survey for policy purposes raises issues about the assumptions which are used for transforming the unit records into aggregates which underpin the social policy analysis. This paper reports upon an HRC funded project to investigate the relationship between personal health status and economic status (especially location in the household distribution, but also in relation to other measures). The project uses unit records of the Household Economic Survey for 1994/5-6/7 years when personal health status was recorded, using both objective and subjective measures. The paper explores some of the processing issues which the analysis is addressing.

Income Distribution and Equity

D. Milne & J. Savage (ed) Reporting Economics: A NZ Guide to Covering the Economy, (JTO, 1999) p.103-110.

Keywords: Distributional Economics;

The morning this section was drafted, I listened to a lead story dealing with a statistical study which showed income inequality had been increasing over the last 15 years. The work was familiar because the results had been first reported three years earlier. The presentation made the New Zealand cricket team look world class. The journalists confused wealth and income, gross income and net income, income levels and income shares, and percent change and percentage point change. Deductions were drawn that simply are not in the data. Given it was one of our top news teams, the inference to any journalist faced with a story about the income distribution is “dont”.

What Has Happened in New Zealand to Income Distribution and Poverty Levels

Social Policy for the 21st Century: Justice and Responsibility Proceedings of the 1999 National Social Policy Conference, 21-23 July, 1999. Social Policy Research Centre Reports and Proceedings, 1999.

Keywords: Distributional Economics; Social Policy;

Introduction

In a recent article, the London Economist describes the “bad point” of New Zealand’s economic reforms which began in the mid 1980s as “a big increase in inequality.”1 In fact the New Zealand economy has generally had a poor growth performance, higher unemployment, and a worrying current account deficit ever since the reforms (although price levels have been more stable). Table 1 is a comparison between the overall economic performance of the Australian, New Zealand and OECD economies since 1985. There is no doubt the New Zealand economy has done worse. 2 Why this has happened, and why the New Zealand economic performance has been inferior to the Australian one, belongs elsewhere. For this paper, The Economist’s observation emphasizes just how widespread is the view that New Zealand has a more unequal income distribution, as a result of the policy changes of the last one and a half decades. But The Economist comment gives no sense of the magnitude of the increased inequality, nor its causes, which are the focus of this paper.