and Mental Wellbeing (with Francesca Cornaglia
and Naomi Feldman), Journal of Human Resources, 2014
We provide empirical evidence of crime’s impact on the mental wellbeing of both victims and non-victims. We differentiate between the direct impact to victims and the indirect impact to society due to the fear of crime. The results show a decrease in mental wellbeing after violent crime victimization and that the violent crime rate has a negative impact on mental wellbeing of non-victims. Property crime victimization and property crime rates show no such comparable impact. Finally, we estimate that society-wide compensation due to increasing the crime rate by one victim is about 80 times more than the direct impact on the victim.
Effects of Temporary In-Work Benefits for Welfare Recipients: Examination of the Australian Working Credit Programme (with Roger Wilkins) (2012), Fiscal Studies
We investigate the impact of ‘Working Credit’, a nationally-implemented programme which created increased incentives for welfare recipients to undertake temporary work. Highlighting the difficulties in identifying programme effects in the absence of a randomised controlled trial or a natural experiment, we produce estimates of impacts under alternative identifying assumptions and also undertake various robustness checks. Unconditional and regression-adjusted difference-in-difference estimates suggest that the introduction of the Working Credit programme increased employment rates, earnings and exits for those on income support, but matching methods and various robustness checks provide conflicting evidence on the impact on movements from welfare to work for unemployment benefit recipients. Moreover, estimated effects on earnings while on benefits are sensitive to identifying assumptions. Notwithstanding our inability to conclusively identify causal effects of the programme, we note that our findings are broadly consistent with the incentive effects of the programme, with recipients making use of the credits to increase earnings while on benefits, but not increasing movements off welfare.
Which Children Benefit From Non-Parental Care? (with Chikako Yamauchi), Economics of Education Review, 2011
Although the impact of non-parental care on children has been widely analysed, there is still little consensus in the literature. This is due in part to the issue of selection: if families who choose parental care are different from those who opt for non-parental care, the observed association between outcomes and care may not be causal. We address this using four strategies: controlling for a wide array of observable characteristics (including lagged outcomes), using propensity score matching, estimating unobservables bias by looking at selection on observables, and instrumenting use of care with supply-side or demand-side shocks. We find that non-parental care is associated with worse behavioural outcomes, but that the magnitude of the difference is quite small. Moreover, we cannot reject the hypothesis that our effects are solely due to selection. To the extent that we observe differential impacts, the association between non-parental care and behavioural outcomes appears to be more negative in high-SES families, and less negative in day care centres with smaller group sizes (though again, these relationships may not be causal).
Informal Care and Labor Market Participation, Labour Economics, 2010
Understanding the effect of informal care for an elderly or disabled person on labor market outcomes is important for developing policies targeted towards caregivers. However, because of omitted variables bias, simple cross-sectional relationships may provide a misleading picture of the causal impact of informal care provision on labor force status. To address this, I use panel data for the period 2001−2007, which make it possible to track the same individuals over time, and observe how their outcomes alter as their care arrangements change. While caregiving does appear to have a modest negative impact on labor force participation, this impact is only one-quarter to one-sixth as large in the panel as in the cross-section. Taking account of individual heterogeneity, the impact of caregiving on other labor force outcomes (and on life satisfaction) seems to be small or non-existent. Large estimated effects from cross-sectional regressions are most likely driven by individual heterogeneity. One possible interpretation of this result is that the impact of caregiving on labor market outcomes and life satisfaction takes several years to manifest itself. Another is that the causal effect of caregiving on labor force outcomes and life satisfaction is quite small.
Do Employers Discriminate by Gender? A Field Experiment in Female-Dominated Occupations (with Alison Booth), Economics Letters, 2010
We test for gender discrimination by sending fake CVs to apply for entry-level jobs. Female candidates are more likely to receive a callback, with the difference being largest in occupations that are more female-dominated.
Does Maternal Age Affect
Children’s Test Scores? (with Xiaodong Gong),
Australian Economic Review, 2010
We estimate the relationship between maternal age and child outcomes, using indices aimed at measuring overall outcomes, learning outcomes and social outcomes. In all cases,we find evidence that children of older mothers have better outcomes. Not only do children born to mothers in their twenties do better than children born to teen mothers, but children born to mothers in their thirties do better than children born to mothers in their twenties. However, when we control for other socioeconomic characteristics, such as family income, parental education and single parenthood, the coefficients on maternal age become small and statistically insignificant. The only exception is an index of social outcomes, which is positively associated with maternal age, even controlling for socioeconomic factors. For cognitive outcomes, young motherhood appears to be a marker, not a cause, of poor child outcomes.
Does Racial and Ethnic Discrimination Vary Across Minority Groups? Evidence From a Field Experiment (with Alison Booth and Elena Varganova), Oxford Bulletin of Economics and Statistics, 2012
We conduct a large-scale audit discrimination study to measure labor market discrimination across different minority groups in Australia – a country where one quarter of the population was born overseas. To denote ethnicity, we use distinctively Anglo-Saxon, Indigenous, Italian, Chinese, and Middle Eastern names, and our goal is a comparison across multiple ethnic groups rather than focusing on a single minority as in most other studies. In all cases, we applied for entry-level jobs and submitted a CV showing that the candidate had attended high school in Australia. We find economically and statistically significant differences in callback rates, suggesting that ethnic minority candidates would need to apply for more jobs in order to receive the same number of interviews. These differences vary systematically across groups, with Italians (a more established migrant group) suffering less discrimination than Chinese and Middle Easterners (who have typically arrived more recently). We also explore various explanations for our empirical findings.
Earlier version (with 2 additional experiments)
Does Size Matter in Australia? (with Michael Kortt), Economic Record, 2010
We estimate the relationship between hourly wages and two aspects of body size: height and body mass index (BMI). We observe a height premium, with an additional 10 centimetres of height being associated with a 3 per cent increase in hourly wages for men. However, workers with higher BMI scores do not seem to earn lower wages. These results are largely unaffected by controlling for physical health, or (in the case of BMI) instrumenting with the BMI of biological family members. A survey of previous instrumental variables studies shows little indication of systematic biases, suggesting that OLS may provide a reasonable estimate of the causal impact of BMI on wages.
Stata do-file (zipped)
Who Benefits from the Earned Income Tax Credit? Incidence Among Recipients, Coworkers and Firms, B.E. Journal of Economic Analysis & Policy (Advances), 2010
How are hourly wages affected by the Earned Income Tax Credit? Using variation in state EITC supplements, I find that a 10 percent increase in the generosity of the EITC is associated with a 5 percent fall in the wages of high school dropouts and a 2 percent fall in the wages of those with only a high school diploma, while having no effect on the wages of college graduates. Given the large increase in labor supply induced by the EITC, this is consistent with most reasonable estimates of the elasticity of labor demand. Although workers with children receive a much larger EITC than childless workers, and the effect of the credit on labor force participation is larger for those with children, the hourly wages of both groups are similarly affected by an EITC increase. As a check on this strategy, I also use federal variation in the EITC across gender-age-education groups, and find that those demographic groups that received the largest EITC increases also experienced a drop in their hourly wages, relative to other groups.
Stata data and dofiles (zipped, 1.5gig)
Raising the Minimum Wage Help the Poor?, Economic Record, 2007
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.
Stata do-file (zipped)
Earned Income Tax Credits and Labor
Supply: New Evidence from a British Natural Experiment, National Tax
(Discussion paper version: ANU CEPR Discussion Paper 488)
With many countries considering the adoption of a system of earned income tax credits, it is useful to analyze how different types of credits affect labor supply and earnings. This paper focuses on a 1999 reform to the UK tax credit system, which increased the value of the credit and reduced the phase-out rate. Using panel data, with individual fixed effects, I compare eligibles and ineligibles within five groups: all individuals; those whose demographic characteristics predict that they will have low earnings; single women; women in couples; and men in couples. Over a 15-month period, boosting the credit appears to have raised the labor participation rates, hours, and earnings of those who were eligible to receive it.
Stata do-file (zipped)
Employment Effects of Minimum Wages: Evidence from a Quasi-Experiment, Australian Economic Review, 2003
To estimate the impact of raising the minimum wage on employment, this paper uses a natural experiment, arising from six increases in the Western Australian statutory minimum wage during the period 1994-2001. Relative to the rest of Australia, the employment to population ratio in Western Australia fell by a statistically significant margin following four of the six increases. Aggregating the increases, the elasticity of labour demand with respect to the Western Australian statutory minimum wage is found to be -0.29. [Abstract amended to reflect March 2004 erratum]
Erratum, Australian Economic Review, March 2004 (this presents new versions of Tables 2-4, but the conclusions are qualitatively unchanged).
Reply, Australian Economic Review, June 2004
The results of my study on the effect of minimum wages on employment (Leigh 2003, 2004) have been brought into question by Watson (2004), which raises some potential methodological concerns. Careful reanalysis of the Western Australian minimum wage experiment demonstrates that this critique is not well-founded. Further checks show that the results are robust to a number of alternative specifications, in addition to those presented in the original paper.
·Discussed the 2004 Safety
Net Review ·Safety Net Review decision, 5 May 2004 (pages 62-64) ·ACTU submission (pages 100-103) ·ACCI submission (pages 9.8-9.17) ·Commonwealth Government submission (pages 59-60) ·State and Territory Governments' submission (page 36) (this
unfortunately misquotes my 14 January AFR op-ed) ·ACTU reply submission (pages 57-60, Exhibit Tags 2-3) ·
of mobility: Was Australia 1870–2017 a more socially mobile society than
England? (with Gregory Clark and Mike Pottenger), Explorations in Economic History, 2020
There is longstanding pride among Australians that by throwing off the social class demarcations that defined their ossified colonial parent society, England, they created an open, socially mobile society. The paper tests this belief by estimating long run social mobility rates in Australia 1870–2017, using the status of rare surnames. The status information includes occupations from electoral rolls 1903–1980, and records of degrees awarded by Melbourne and Sydney universities 1852–2017. Status persistence was strong throughout, with an intergenerational correlation of occupational or educational status of 0.7–0.8, and no change over time. Mobility rates were also just as low within UK immigrants and their descendants, so ethnic group effects explain none of the immobility. The less pronounced class divisions of Australia compared to England did not enhance social mobility. A possible sign of enhanced Australian social mobility – the fact that surnames associated with convicts already had a modest elite status by 1870 – seems to derive from convicts transported to Australia from England being positively selected in terms of human capital.
and Market Concentration, When Shareholding Is More Skewed Than Consumption
(with Joshua Gans, Martin Schmalz and Adam Triggs), Oxford Review of Economic Policy, 2019
Economic theory suggests that monopoly prices hurt consumers but benefit shareholders. But in a world where individuals or households can be both consumers and shareholders, the impact of market power on inequality depends in part on the relative distribution of consumption and corporate equity ownership across individuals or households. The paper calculates this distribution for the United States, using data from the Survey of Consumer Finances and the Consumer Expenditure Survey, spanning nearly three decades from 1989 to 2016. In 2016, the top 20 percent consumed approximately as much as the bottom 60 percent, but had 13 times as much corporate equity. Because ownership is more skewed than consumption, increased mark-ups increase inequality. Moreover, over time, corporate equity has become even more skewed relative to consumption.
·Top Wealth Shares in
Australia 1915-2012 (with Pamela Katic), Review
of Income and Wealth, 2016
Combining data from surveys, inheritance tax records, and rich lists, we estimate top wealth shares for Australia from World War I until the present day. We find that the top 1 percent share declined by two-thirds from 1915 until the late 1960s, and rose from the late 1970s to 2010. The recent increase is sharpest at the top of the distribution, with the top 0.001 percent wealth share tripling from 1984 to 2012. The trend in top wealth shares is similar to that in Australian top income shares (though the drop in the first half of the twentieth century is larger for wealth than income shares). Since the early twentieth century, top wealth shares in Australia have been lower than in the U.K. and U.S.
·Long-Run Trends in Australian Executive Remuneration: BHP,
1887-2012 (with Mike Pottenger), Australian Economic
History Review, 2016
Outside the United States, little is known of long-run trends in executive compensation. We fill this gap by studying BHP Billiton, a resources giant that has long been one of the largest companies on the Australian stock market. From 1887 to 2012, trends in CEO and director remuneration (relative to average earnings) follow a U-shape. This matches the pattern for US executive compensation, Australian top incomes, and (for the past two decades) average trends in executive compensation in top Australian firms. Like the United States, Australia experienced a post-war ‘great compression’ prior to the recent ‘great divergence’.
·The Distribution of Top Incomes
in Five Anglo-Saxon Countries Over the Long-Run (with Tony
Atkinson), Economic Record, 2013
Taking five Anglo-Saxon countries that have relatively similar backgrounds and tax systems – Australia, Canada, New Zealand, the UK, and the US – we see that the shares of the very richest exhibit a strikingly similar pattern, falling in the three decades after World War II, before rising sharply from the mid-1970s onwards. The share of the top 1 percent is highly correlated across Anglo-Saxon countries, more so than with the share of the next 4 percent. Controlling for country and year fixed effects, we find that a reduction in the marginal tax rate on wage income is associated with an increase in the share of the top percentile group. Likewise, a fall in the marginal tax rate on investment income (based on a lagged moving average) is associated with a rise in the share of the top percentile group.
· ·Intergenerational Income Mobility in Urban China
(with Cathy Gong and Xin Meng), Review of Income and Wealth,
2012 ·This paper estimates the
intergenerational income elasticity for urban China, paying careful attention
to the potential biases induced by income fluctuations and life cycle effects.
Our preferred estimate indicates that the intergenerational income elasticity
for father–son is 0.63. This suggests that while China has experienced rapid
growth of absolute incomes, the relative position of children in the
distribution is largely related to their parents' incomes. By investigating
possible causal channels, we find that parental education plays one of the most
important roles in transmitting economic status from parents to children. · ·Pooling data for 1905 to
2000, we find no systematic relationship between top income shares and economic
growth in a panel of 12 developed nations observed for between 22 and 85 years.
After 1960, however, a one percentage point rise in the top decile’s income share
is associated with a statistically significant 0.12 point
rise in GDP growth during the following year. This relationship is not driven
by changes in either educational attainment or top tax rates. If the increase
in inequality is permanent, the increase in growth appears to be permanent, but
it takes 13 years for the cumulative positive effect of faster growth on the
mean income of the bottom nine deciles to offset the negative effect of
reducing their share of total income. · ·Death, Dollars and Degrees: Socio-economic
Status and Longevity in Australia (with Philip Clarke) Economic
We estimate differences in mortality and life expectancy by levels of income, education and area-based socio-economic status using the Household, Income and Labour Dynamics in Australia survey. The study involved 16,905 respondents aged over twenty years interviewed between 2001 and 2007. Mortality estimates were based on proportional hazard regression models. The relative risk of mortality between the poorest and richest income quintile was 1.88 (1.45, 2.44) times higher and this translated into a life expectancy gap (at age twenty) of six years. Having more than twelve years of education was also associated with a significantly lower risk of death. Area-based measures of socio-economic disadvantage were not significant after controlling for individual-level factors.
· ·Inequality in Indonesia: What Can We
Learn from Top Incomes? (with Pierre van der Eng)
Journal of Public Economics, 2009
Using taxation and household survey data, this paper estimates top income shares for Indonesia during 1920-2004. Our results suggest that top income shares grew during the 1920s and 1930s, but fell in the post-war era. We observe a sharp rise in top income shares during the late-1990s, coinciding with the 1997-98 economic crisis. Where comparable data are available, top income shares in Indonesia are generally higher than in other countries, a finding that is at odds with the view that Indonesia is a relatively egalitarian society. This suggests that top income shares may provide a more complete picture of developing country inequality in comparative perspective.
Table and figures in Excel format (short version)
Tables and figures in Excel format (long version)
Data and do-files in Stata format (zipped)
Top Incomes in Indonesia 1920-2004 (with Pierre van der Eng) in A.B. Atkinson and T. Piketty (eds) Top Incomes Over the Twentieth Century: Volume II – A Global Perspective, Oxford University Press, 2009
This is a longer version of the above paper.
Health and Economic Inequality (with Christopher Jencks and Timothy Smeeding). Prepared for W. Salverda, B. Nolan, and T. Smeeding (eds), The Oxford Handbook of Economic Inequality, 2009
Top Incomes. Prepared for W. Salverda, B. Nolan, and T. Smeeding (eds), The Oxford Handbook of Economic Inequality, 2009
Top Incomes and National Savings (with Alberto Posso), Review of Income and Wealth, 2009
The relationship between income inequality and national savings is theoretically ambiguous, and past empirical studies have delivered mixed results. We revisit the question using a newly available source of data on inequality: the income share of the richest 10 percent and the richest 1 percent. Combining this with historical data on national savings rates, we are able to investigate the relationship for 11 developed countries over the period 1921–2002. We find no consistent relationship between lagged top income shares and current savings rates, and our standard errors are small enough that we are able to reject more than modest effects in either direction. We view this as suggesting that inequality at the top end of the distribution is not a major driver of national savings rates.
Data and do-files in Stata format (zipped)
How Closely Do Top Income
Shares Track Other Measures of Inequality?, Economic Journal, 2007
In recent years, researchers have used taxation statistics to estimate the share of total income held by the richest groups, such as the top 10% or the top 1%. Compiling a standardised top income shares dataset for thirteen developed countries, I find that there is a strong and significant relationship between top income shares and broader inequality measures, such as the gini coefficient. This suggests that panel data on top income shares may be a useful substitute for other measures of inequality over periods when alternative income distribution measures are of low quality, or unavailable.
Mobility in Australia, Berkeley Electronic Press: Contributions in
Economic Analysis and Policy, 2007
Combining four surveys conducted over a forty year period, I calculate intergenerational earnings elasticities for Australia, using predicted earnings in parents’ occupations as a proxy for actual parental earnings. In the most recent survey, the elasticity of sons’ wages with respect to fathers’ wages is around 0.2. Comparing this estimate with earlier surveys, I find little evidence that intergenerational mobility in Australia has significantly risen or fallen over time. Applying the same methodology to United States data, I find that Australian society exhibits more intergenerational mobility than the United States. My method appears to slightly overstate the degree of intergenerational mobility; if the true intergenerational earnings elasticity in the United States is 0.4–0.6 (as recent studies have suggested), then the intergenerational earnings elasticity in Australia is probably around 0.2–0.3.
More Inequality, Less
Social Mobility (with Dan Andrews), Applied Economics Letters,
We investigate the relationship between inequality and intergenerational mobility. Proxying fathers’ earnings with using detailed occupational data, we find that sons who grew up in countries that were more unequal in the 1970s were less likely to have experienced social mobility by the late-1990s.
·Inequality and Mortality:
Long-Run Evidence from a Panel of Countries (with Christopher Jencks),
Journal of Health Economics, 2007
We investigate whether changes in economic inequality affect mortality in rich countries. To answer this question we use a new source of data on income inequality: tax data on the share of pretax income going to the richest 10 percent of the population in Australia, Canada, France, Germany, Ireland, the Netherlands, New Zealand, Spain, Sweden, Switzerland, the UK, and the US between 1903 and 2003. Although this measure is not a good proxy for inequality within the bottom half of the income distribution, it is a good proxy for changes in the top half of the distribution and for the Gini coefficient. In the absence of country and year fixed effects, the income share of the top decile is negatively related to life expectancy and positively related to infant mortality. However, in our preferred fixed-effects specification these relationships are weak, statistically insignificant, and likely to change their sign. Nor do our data suggest that changes in the income share of the richest 10 percent affect homicide or suicide rates.
·Data and do-files
in Stata format (zipped) ·
Do Redistributive State Taxes Reduce Inequality?, National Tax Journal, 2008
Do income taxes levied at a state or regional level affect the after-tax distribution of income? Or do workers merely move between regions, causing pre-tax wages to adjust? Using the full income tax parameters for all US states from 1977-2002, I create a “simulated tax redistribution index”, which captures the mechanical impact of changes in tax policy on the Gini coefficient, but is exogenous to any behavioral response. Analyzing the effect of this redistribution index on inequality, I find that gross wages do not adjust so as to undo the effect of changes in state income taxes. On aggregate, more redistributive state taxes do not substantially affect interstate migration, nor do they reduce per-capita state personal income.
do-files in Stata format (zipped)
Top Incomes in New Zealand 1921-2005: Understanding the Effects of Marginal Tax Rates, Migration Threat, and the Macroeconomy (with Tony Atkinson), Review of Income and Wealth, 2008
Using taxation statistics, we estimate the income share held by top income groups in New Zealand over the period 1921–2005. We find that the income share of the richest fell during the 1930s, rose again after the Second World War, and steadily declined from the late-1950s until the mid-1980s. From the mid-1980s until the mid-1990s, top income shares rose rapidly, particularly at the very top of the distribution. We present evidence that top marginal tax rates and changing top income shares in Australia and the United Kingdom may have contributed to fluctuations in the income share of the richest 1 percent. Past economic growth does not seem to have a strong effect on the income share of the top percentile group.
Using taxation statistics, we estimate the income share held by top income groups in Australia over the period 1921-2003. 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.
Prior to the last three decades, regular surveys on household income were rare or non-existent in many developed countries, making it difficult for economists to develop long-run 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 to 2001. Inequality fell in the 1950s and the 1970s, and rose during the 1980s and 1990s – a pattern similar to the United Kingdom.
Data and do-files in Stata format (zipped)
Trust, Inequality, and Ethnic Heterogeneity, Economic Record, 2006
Using a large Australian social survey, combined with precise data on neighbourhood characteristics, I explore the factors that affect trust at a local level (“localised trust”) and at a national level (“generalised trust”). Trust is positively associated with the respondent’s education, and negatively associated with the amount of time spent commuting. At a neighbourhood level, trust is higher in affluent areas, and lower in ethnically and linguistically heterogeneous communities, with the effect being stronger for linguistic heterogeneity than ethnic heterogeneity (suggesting that communication may be a key mediating factor). Linguistic heterogeneity reduces localised trust for both natives and immigrants, and reduces generalised trust only for immigrants. Instrumental variables specifications show similar results. By contrast with the United States, there is no apparent relationship between trust and inequality across neighbourhoods in Australia.
Op-Ed version, Australian Financial Review, 23 July 2005
Does Equality Lead to Fraternity?, Economics Letters, 2006
Several cross-country studies have observed a negative correlation between inequality and interpersonal trust. Using data from 59 countries, I instrument for inequality using the relative size of the mature-aged cohort, and find that a rise in inequality reduces trust.
School Principals Respond to Increased Public Scrutiny? New Survey Evidence
from Australia (with Michael Coelli
and Gigi Foster), Economic Record, 2018
We explore responses of Australian school principals to the introduction of test score reporting via the My School website in 2010. Our analysis is motivated by the implicit assumption that heightened public scrutiny should motivate principals to align schools' policies and practices with what is believed to generate better test results. We use responses from both public and private schools to a custom-built questionnaire administered to principals before (2009) and after (2012) the My School website launch. We find scarce evidence of meaningful adjustments over time, but we do find evidence of significantly different policies and practices across school groups.
·The Economics and Politics of Teacher Merit Pay,
CESifo Economic Studies, 2012 ·The
debate over merit pay can be summed up as follows: economists like it, voters
love it, and teachers are divided. Can merit pay be made to work? I survey
three sets of data that are relevant to answering this question: impact studies
of teacher merit-pay schemes, evidence on teacher attitudes to merit pay, and
surveys of attitudes in the general public to merit pay. Looking at the
existing merit-pay plans, one is struck by the fact that their incentive
schemes are often very complicated, and most estimates are of short-run effects
(so do not capture selection into the teaching profession). Teacher attitudes
are mixed, with new teachers more open to merit pay than their more experienced
colleagues. Teachers are particularly hostile to merit-pay schemes based on
test scores, raising a particular challenge for the
political sustainability of such plans. I conclude with 10 suggestions for
future research on teacher merit pay. · ·Teacher Pay and
Teacher Aptitude, Economics of Education Review, 2012 ·Can
changes in teacher pay encourage more able individuals to enter the teaching
profession? So far, studies of the impact of pay on the aptitude distribution
of teachers have provided mixed evidence on the extent to which altering
teacher salaries represents a feasible solution to the teacher quality problem.
One possible reason is that these studies have been unable to separate labor supply effects from labor
demand effects. To address this, I model the relationship between current
salaries and the academic aptitude of future teachers (those entering teacher
education courses). Using a unique dataset of test scores for every individual
admitted into an Australian university between 1989 and 2003, I explore how
changes in average pay or pay dispersion affect the decision to enter teacher
education courses in Australia’s eight states and territories. A 1 percent rise
in the salary of a starting teacher boosts the average aptitude of students
entering teacher education courses by 0.6 percentile ranks, with the effect
being strongest for those at the median. This result is robust to instrumenting
for teacher pay using uniform salary schedules for public schools. I also find
some evidence that pay dispersion in the non-teaching sector affects the aptitude
of potential teachers. · ·Long-Run Trends in School Productivity:
Evidence From Australia (with Chris Ryan), Education
Finance and Policy, 2011
Outside the United States, very little is known about long-run trends in school productivity. We present new evidence using two data series from Australia, where comparable tests are available back to the 1960s. For young teenagers (aged 13-14), we find a small but statistically significant fall in numeracy over the period 1964-2003, and in both literacy and numeracy over the period 1975-1998. The decline is in the order of one-tenth to one-fifth of a standard deviation. Adjusting this decline for changes in student demographics does not affect this conclusion; if anything, the decline appears to be more acute. The available evidence also suggests that any changes in student attitudes, school violence, and television viewing are unlikely to have had a major impact on test scores. Real per-child school expenditure increased substantially over this period, implying a fall in school productivity. Although we cannot account for all the phenomena that might have affected school productivity, we identify a number of plausible explanations.
· ·Estimating Teacher Effectiveness From
Two-Year Changes in Students’ Test Scores, Economics of Education
Using a dataset covering over 10,000 Australian primary school teachers and over 90,000 pupils, I estimate how effective teachers are in raising students’ test scores from one exam to the next. Since the exams are conducted only every two years, it is necessary to take account of the teacher’s work in the intervening year. Even after adjusting for measurement error, the resulting teacher fixed effects are widely dispersed across teachers, and there is a strong positive correlation between a teacher’s gains in literacy and numeracy. Teacher fixed effects show a significant association with some, though not all, observable teacher characteristics. Experience has the strongest effect, with a large effect in the early years of a teacher’s career. Female teachers do better at teaching literacy. Teachers with a master’s degree or some other form of further qualification do not appear to achieve significantly larger test score gains. Overall, teacher characteristics found in the departmental payroll database can explain only a small fraction of the variance in teacher performance.
do file (the data are confidential) · ·The Impact of the Tax-Transfer System on Education and
Skills in Australia, Report prepared for the Australian Treasury’s
Australia’s Future Tax System Review, 2009
The tax-transfer system can affect both costs and benefits of higher education. For example, more generous student income support should increase educational participation rates, while more progressive taxes should reduce educational participation rates. With some exceptions, the literature on taxes and educational participation generally concludes that taxation can have a substantial impact on human capital acquisition. However, one of the features about the empirical studies on taxation and human capital is that it consists almost exclusively of simulation studies, which model behaviour according to a set of parameters that are drawn from previous studies. A limitation of these studies is that they generally assume no uncertainty and full information, which may not hold in practice. The literature on subsidies and human capital tends to consist largely of natural experiment studies, which have the advantage that they are estimated from real-world policy changes. These studies tend to suggest that subsidies can affect participation, but that the effects are larger for low-income students, and that the impact of grants is larger than the impact of loans. Since educational subsidies are generally marketed directly to young people, it is not unreasonable to think changes in subsidies may be more salient than the degree of progressivity in the taxation system. In trying to set optimal education taxes and subsidies, it is useful to have regard to the literature on social returns to education. This suggests that social returns are present, particularly in the areas of crime (from higher school completion rates) and productivity (from higher university completion rates). However, the best estimates of the size of social returns suggest that in the main, they should not be a key driver of policy. By contrast, there is robust evidence that private returns to education are large and significant. Completing year 12 raises gross income by 30 percent (relative to completing year 10) and completing a bachelor’s degree raises gross earnings by 49 percent (relative to completing year 12). Taking taxes and transfers into account lowers these estimates by 11-15 percent, but the private gain from human capital acquisition is still substantial. Finally, I look across 27 developed nations, to see whether those with higher public subsidies to education, or less progressive taxes, have higher rates of participation in tertiary education. Contrary to theoretical predictions, I find no significant evidence that more generous subsidies or lower tax rates on the rich have the effect of raising educational participation. One possible interpretation of this result is that the cross-country measure of participation is poorly measured, or confounded by an omitted variable that affects both participation and subsidies/taxes. Another plausible explanation is that, in aggregate, taxes and subsidies have a relatively small impact on educational participation.
· ·How Much of the Variation in Literacy and Numeracy
can be Explained by School Performance? (with Hector Thompson), Economic
Family background is known to have a substantial impact on students’ literacy and numeracy results. This raises questions about whether any of the remaining differences in results are due to school performance, or whether they are merely due to random noise. This article reviews research from the OECD’s Programme for International Student Assessment (PISA) study, based on student-level analysis. It then presents new evidence based on publicly reported school-level data from Western Australia. Combining test results with data on schools’ socioeconomic characteristics, this study estimates the degree to which some schools outperform those with similar characteristics. On a ‘like schools’ basis, school differences are shown to be persistent across subjects, grades and years.
· ·Estimating Cognitive Gaps Between Indigenous and
Non-Indigenous Australians (with Xiaodong Gong), Education Economics, 2008 ·Improving
cognitive skills of young children has been suggested as a possible strategy
for equalising opportunities across racial groups. Using data on 4-5 year olds in the Longitudinal
Survey of Australian Children, we focus on two cognitive tests: the Peabody
Picture Vocabulary Test (PPVT) and the ‘Who Am I?’ test (WAI). We estimate the
test score gap between Indigenous and non-Indigenous children to be about 0.3
to 0.4 standard deviations, suggesting that the typical Indigenous 5 year-old has a similar test score to the typical
non-Indigenous 4 year-old. Between one-third and two-thirds of the
Indigenous/non-Indigenous test score gap appears to be due to socio-economic
differences, such as income and parental education. We review the literature on
test score differences in Australia, and find that our
estimated gaps are lower than most of those found in the literature. This
implies that the test score gap between Indigenous and non-Indigenous children
may widen over the lifecycle, a finding that has implications for policies
aimed at improving educational opportunities for Indigenous children.
Stata do-files (zipped)
· ·How and Why has Teacher
Quality Changed in Australia? (with Chris
Ryan), Australian Economic Review, 2008 ·International
research suggests that differences in teacher performance can explain a large
portion of student achievement. Yet little is known about how the quality of
the Australian teaching profession has changed over time. Using consistent data
on the academic aptitude of new teachers, we compare those who have entered the
teaching profession in Australia over the past two decades. We find that the
aptitude of new teachers has fallen considerably. Between 1983 and 2003, the
average percentile rank of those entering teacher education fell from 74 to 61,
while the average rank of new teachers fell from 70 to 62. One factor that
seems to have changed substantially over this period is average teacher pay.
Compared to non-teachers with a degree, average teacher pay
fell substantially over the period 1983-2003. Another factor is pay dispersion
in alternative occupations. During the 1980s and 1990s, non-teacher earnings at
the top of the distribution rose faster than earnings at the middle and bottom
of the distribution. For an individual with the potential to earn a wage at the
90th percentile of the distribution, a non-teaching occupation looked much more
attractive in the 2000s than it did in the 1980s. We believe that both the fall
in average teacher pay, and the rise in pay differentials in non-teaching
occupations are responsible for the decline in the academic aptitude of new
teachers over the past two decades.
Op-Ed, The Australian, 28 August 2006
· ·How Much Do Public
Schools Really Cost? Estimating the Relationship Between House Prices
and School Quality (with Ian Davidoff), Economic Record, 2008
This paper investigates the relationship between housing prices and the quality of public schools in the Australian Capital Territory. To disentangle the effects of schools and other neighbourhood characteristics on the value of residential properties, we compare sale prices of homes on either side of high school attendance boundaries. We find that a 5 percent increase in test scores (approximately one standard deviation) is associated with a 3.5 percent increase in house prices. Our result is in line with private school tuition costs, and accords with prior research from Britain and the United States. Estimating the effect of school quality on house prices provides a possible measure of the extent to which parents value better educational outcomes.
Stata datasets and do-files (zipped)
·Do Very High Tax Rates Induce Bunching? Implications
for the Design of Income-Contingent Loan Schemes (with Bruce Chapman),
Economic Record, 2009
We test whether very high marginal tax rates affect taxpayer behaviour, using a unique policy. Under the Higher Education Contribution Scheme – an income-related university loans scheme in Australia – former students with a debt face a sharp discontinuity. At the first repayment threshold they are required to repay a percentage of their entire income, resulting in an effective marginal tax rate that could be regarded as being as high as 76,000 percent. We formally model the taxpayer decision, and then use a sample of taxpayer returns provided to us by the tax office to investigate whether taxpayers bunch below the repayment threshold. We find a statistically significant degree of bunching below the threshold, but the effect is economically small. On net, we estimate that both the deadweight cost and the budgetary loss are less than A$1 million per year, a small fraction of the amount annually repaid through the Higher Education Contribution Scheme. The result has an important implication for the design of income contingent loans for higher education, such as those being introduced in the UK for tuition in September 2006. This is that it is possible to design arrangements in which the first income threshold of repayment is apparently high, but which are still able to deliver relatively high revenue streams in the early stages of income contingent policy reform without important tax payment avoidance consequences. Our findings also reinforce earlier research suggesting only minimal bunching around kink points in taxation schedules.
Returns to Education in Australia,
Economic Papers, 2008
Using data from the 2001-2005 waves of the Household, Income and Labour Dynamics in Australia survey, and taking account of existing estimates of ability bias and social returns to schooling, I estimate the economic return to various levels of education. Raising high school attainment appears to yield the highest annual benefits, with per-year gains as high as 30 percent (depending on the adjustment for ability bias). Some forms of vocational training also appear to boost earnings, with significant gains from Certificate Level III/IV qualifications (for high school dropouts only), and from Diploma and Advanced Diploma qualifications. At the university level, Bachelor degrees and postgraduate qualifications are associated with significantly higher earnings, with each year of a Bachelor degree raising annual earnings by about 15 percent. For high school, slightly less than half the gains are due to increased productivity, with the rest due to higher levels of participation. For vocational training, about one-third of the gains are from productivity, and two-thirds from greater participation. For university, most of the gains are from productivity. I find some evidence that the productivity benefits of education are higher towards the top of the distribution, but the participation effects are higher towards the bottom of the conditional earnings distribution.
to Education Using Different Natural Experiment Techniques (with Chris
Ryan), Economics of Education Review, 2008 ·We
compare three quasi-experimental approaches to estimating the returns to
schooling in Australia: instrumenting schooling using month of birth, instrumenting
schooling using changes in compulsory schooling laws, and comparing outcomes
for twins. With annual pre-tax income as our measure of income, we find that
the naļve (OLS) returns to an additional year of schooling is 13%. The month of
birth IV approach gives an 8% rate of return to schooling, while using changes
in compulsory schooling laws as an IV produces a 12% rate of return. Finally,
we review estimates from twins studies. While these
studies have tended to estimate a lower return to education, we believe that
this is primarily due to the better measurement of income and schooling in our
dataset. Australian twins studies are consistent with
our findings insofar as they find little evidence of ability bias in the OLS
rate of return to schooling. Our estimates of the ability bias in OLS estimates
of the rate of return to schooling range from 9% to 39%. Overall, our findings
suggest the Australian rate of return to education, corrected for ability bias,
is around 10%, which is similar to the rate in
Britain, Canada, the Netherlands, Norway and the United States. · ·Pulled Away or Pushed Out?
Explaining the Decline of Teacher Aptitude in the United States (with Caroline
Hoxby), American Economic Review, 2004
Education Next version, Spring 2005
are two main hypotheses for the decline in the aptitude of public
school teachers since 1960: improved job opportunities for females in
other occupations and the compression of teaching wages owing to unionization.
Using data on several college graduating cohorts from 1961 to 1997, we
investigate both hypotheses. To separate the hypotheses, we exploit the fact
that states varied considerably in the progress of unionization and female wage
parity. We proxy for a teacher's aptitude with the mean college aptitude of
students at her undergraduate college. We identify the effects of unionization
using laws that legalized and facilitated teachers' unionization. The evidence
suggests that compression of teaching wages is responsible for about three-quarters
of the decline in teacher aptitude. Females' opportunities in alternative
occupations do matter, but opportunities improved rather similarly for females
of all aptitudes. Although alternative occupations drew women out of teaching
in general, they did not have a sufficiently disproportionate effect on high
aptitude women to explain the bulk of the decline in teachers
Do Output Contractions Trigger Democratic Change? (with Paul Burke), American Economic Journal: Macroeconomics, 2010
Does faster economic growth increase pressure for democratic change, or reduce it? Using data for 154 countries for the period 1963-2007, we examine the short-run relationship between economic growth and moves toward and away from greater democracy. To address the potential endogeneity of economic growth, we use variation in precipitation, temperatures, and commodity prices as instruments for a country’s rate of economic growth. Our results indicate that more rapid economic growth reduces the short-run likelihood of institutional change toward democracy. Output contractions due to adverse weather shocks appear to have a particularly important impact on the timing of democratic change.
Land transfer taxes are a substantial portion of the cost of moving house in many developed countries. However, little is known about the effect of such taxes on the housing market. Since stamp duties are endogenous with respect to the house price, I create an instrumental variable that is the stamp duty on a property, given that postcode’s starting house price and the national house price trend. In a specification with postcode and year fixed effects, this instrument effectively captures policy changes and nonlinearities in the stamp duty schedule. I find that the impact of an increase in the tax rate is to lower house prices, with the magnitude of the effect rising slightly over the medium run. I also observe impacts of stamp duty on housing turnover. A 10 percent increase in stamp duty lowers turnover by 1-2 percent in the first year, and by 4-5 percent if sustained over a 3 year period.
How Partisan is the Press? Multiple Measures of Media Slant (with Joshua Gans), Economic Record, 2012
employ several different approaches to estimate the political position of
Australian media outlets, relative to federal parliamentarians. First, we use
parliamentary mentions to code over 100 public intellectuals on a left-right
scale. We then estimate slant by using the number of mentions that each public
intellectual receives in each media outlet. Second, we have independent raters separately code front-page election stories and
headlines. Third, we tabulate the number of electoral endorsements that
newspapers give to each side of politics in federal elections. Overall, we find
that the Australian media are quite centrist, with very few outlets being
statistically distinguishable from the middle of Australian politics. It is
possible that this is due to the lack of competition in the Australian media
market. To the extent that we can separate content slant from editorial slant,
we find some evidence that editors are more partisan than journalists.
How Much Did the 2009 Australian Fiscal Stimulus Boost Demand? Evidence from Household-Reported Spending Effects, BE Journal of Macroeconomics, 2012
Using survey evidence, I estimate the impact of $21 billion in household payments delivered in Australia between December 2008 and May 2009. Forty percent of households who said that they received a payment reported having spent it. This is a higher spending rate than has been recorded in surveys assessing the 2001 and 2008 tax rebates in the United States. One possible explanation for this is that individuals are more likely to spend "bonuses" (as the Australian payments were described) than "rebates" (as the US payments were described). Using an approach for converting spending rates into an aggregate marginal propensity to consume (MPC), the Australian results are consistent with an aggregate MPC of 0.41-0.42. Since this estimate is based largely on first-quarter spending, it may understate the longer-run impact of the package on consumer expenditure.
Can national infrastructure spending reduce local unemployment? Evidence from an Australian roads program (with Christine Neill), Economic Letters, 2011
Studies of the effect of government spending on unemployment are potentially confounded by reverse causality. To address the endogeneity problem, we exploit variation in a pork-barrel road-building program, and find that higher government expenditure on road-building substantially reduces local unemployment.
Are State Elections Affected by the National Economy? Evidence from Australia (with Mark McLeish), Economic Record, 2009
Using data from 191 Australian state elections, we test how voters respond to economic conditions. We find that unemployment has a strong impact on election outcomes, with each additional percentage point of unemployment reducing the incumbent’s re-election probability by 3-5 percent. However, when we separate luck (unemployment in other states) from competence (unemployment in that state relative to the rest of Australia), we find that both luck and competence are equally important. This is consistent with a psychological theory of the ‘fundamental attribution error’, in which observers consistently underestimate the importance of situational constraints. We also find evidence that unemployment driven by a clearly exogenous source – the United States economy – has a non-trivial impact on the re-election probability of Australian state governments. Our results suggest that Australian voters either retain too many state governments in economic booms, vote out too many state governments in recessions, or perhaps both.
Stata dataset and do-file (zipped)
Australian state unemployment rates 1913-2006 (Excel format)
Is Voting Skin-Deep?
Estimating the Effect of Candidate Ballot Photographs on Election Outcomes
(with Tirta Susilo), Journal of Economic
In the Northern Territory, Australia, ballot papers for territory elections depict candidates’ photographs. We exploit this unusual electoral feature by looking at the effect that candidates’ beauty and skin color has on voting patterns. Our results for beauty are mixed, but we find strong evidence that skin color matters. In electorates with a small Indigenous population, lighter-skinned candidates receive more votes, while in electorates with a high number of Indigenous people, darker-skinned candidates are rewarded at the ballot box. The relationship between skin color and electoral performance is stronger for challengers than incumbents. We explain this with a model in which voters use skin color as a proxy for some underlying characteristic which they value only to the extent that they share the trait.
Stata dataset and do-file (zipped)
Bias at the Ballot Box? Testing Whether Candidates' Gender Affects Their Vote (with Amy King), Social Science Quarterly, 2010
Using data from all elections to the Australian House of Representatives between 1903 and 2004, we examine the relationship between candidates’ gender and their share of the vote. We find that the vote share of female candidates is 0.6 percentage points smaller than that of male candidates (for major parties, the gap widens to 1½ percentage points), but find little evidence that the party preselection system is responsible for the voting bias against women. Over time, the gap between male and female candidates has shrunk considerably as a result of changes in social norms (as proxied by the gender pay gap and attitudinal data) and the share of female candidates running nationwide. We find little evidence that party-based affirmative action policies have reduced the gender penalty against female candidates.
Stata dataset and do-file (zipped)
(with Amy King), Kyklos, 2009
Are beautiful politicians more likely to be elected? To test this, we use evidence from Australia, a country in which voting is compulsory, and in which voters are given ‘How to Vote’ cards depicting photos of the major party candidates as they arrive to vote. Using raters chosen to be representative of the electorate, we assess the beauty of political candidates from major political parties, and then estimate the effect of beauty on voteshare for candidates in the 2004 federal election. Beautiful candidates are indeed more likely to be elected, with a one standard deviation increase in beauty associated with a 1½ – 2 percentage point increase in voteshare. Our results are robust to several specification checks: adding party fixed effects, dropping well-known politicians, using a non-Australian beauty rater, omitting candidates of non-Anglo Saxon appearance, controlling for age, and analyzing the ‘beauty gap’ between candidates running in the same electorate. The marginal effect of beauty is larger for male candidates than for female candidates, and appears to be approximately linear. Consistent with the theory that returns to beauty reflect discrimination, we find suggestive evidence that beauty matters more in electorates with a higher share of apathetic voters.
Are Ballot Order Effects
Heterogeneous? (with Amy King), Social Science Quarterly, 2009
Past studies of ballot order effects have typically focused on the average benefit to a candidate from being placed at the top of the ballot. But it is possible that this simple average may mask systematic differences in how the ballot order effect varies across candidates and voters. To test this, we analyse all Australian federal elections from 1984-2004, a dataset that is an order of magnitude larger than those used in previous ballot order studies. We find that being placed first on the ballot increases a candidate’s vote share by about 1 percentage point. As a proportion of their total vote, the ballot order effect is much larger for independents and minor parties than for major parties. The ballot order effect appears to be similar for male and female candidates, and does not show strong trends upwards or downwards over the 20 year period covered by our study. Across electorates, the ballot order effect is higher in places where voters are younger and fluency in English is lower.
Data and do-files in Stata format (zipped)
Bringing Home the Bacon, Public Choice, 2008
Which electorates receive targeted funding, and does targeted funding swing votes? To answer these questions, I analyze four discretionary programs funded by the Australian federal government during the 2001-2004 election cycle. Controlling for relevant demographic characteristics of the electorate, those electorates held by the governing coalition received a larger share of discretionary funding, and a larger number of program grants. Among government seats, funding does not appear to have been directed towards those that were more marginal. More discretionary funding – particularly on road-building – was associated with a larger swing towards the government in the 2004 election.
Stata dataset and do-file (zipped)
How Do Unionists Vote? Estimating the Causal Impact of Union Membership on Voting Behaviour from 1966 to 2004, Australian Journal of Political Science, 2006
I explore the voting patterns of trade union members in Australian elections conducted between 1966 and 2004, and find that on average, 63 percent of trade union members vote for the Australian Labor Party. Despite the fact that union membership declined from around one-half of the workforce in the early-1980s to one-quarter of the workforce in the early-2000s, unionists have not become more pro-Labor. Analysing unionists’ voting behaviour by gender, I find that male unionists were more pro-Labor than female unionists in the 1960s, but the reverse is true today. Recognising that union membership may be endogenous with respect to political ideology, I instrument for union membership and conclude that the observed association between union membership and voting reflects a causal relationship.
Op-Ed, Australian Financial Review, 3 December 2005
Competing Approaches to Forecasting Elections: Economic Models, Opinion Polling and Prediction Markets (with Justin Wolfers), Economic Record, 2006
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.
Stata dataset and do-file (zipped)
Estimating the Impact of Gubernatorial Partisanship
on Policy Settings and Economic Outcomes: A Regression Discontinuity Approach,
European Journal of Political Economy, 2008
Using panel data from US states over the period 1941-2002, I measure the impact of gubernatorial partisanship on a wide range of different policy settings and economic outcomes. Across 32 measures, there are surprisingly few differences in policy settings, social outcomes and economic outcomes under Democrat and Republican Governors. In terms of policies, Democratic Governors tend to prefer slightly higher minimum wages. Under Republican Governors, incarceration rates are higher, while welfare caseloads are higher under Democratic Governors. In terms of social and economic outcomes, Democratic Governors tend to preside over higher median post-tax income, lower post-tax inequality, and lower unemployment rates. However, for 26 of the 32 dependent variables, gubernatorial partisanship does not have a statistically significant impact on policy outcomes and social welfare. I find no evidence of gubernatorial partisan differences in tax rates, welfare generosity, the number of government employees or their salaries, state revenue, incarceration rates, execution rates, pre-tax incomes and inequality, crime rates, suicide rates, and test scores. These results are robust to the use of regression discontinuity estimation, to take account of the possibility of reverse causality. Overall, it seems that Governors behave in a fairly non-ideological manner.
Does the World Economy Swing National Elections?, Oxford Bulletin of Economics and Statistics, 2009
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.
Stata dataset and do-file (zipped)
Happiness and the Human Development Index: Australia is Not a Paradox (with Justin Wolfers), Australian Economic Review, 2006
Blanchflower and Oswald (2005) observe an apparent puzzle: they claim that Australia ranks highly in the Human Development Index (HDI), but relatively poorly in happiness. However, when we compare their happiness data with the HDI, Australia appears happier, not sadder, than its HDI score would predict. This conclusion also holds when we turn to a larger cross-national dataset than the one used by Blanchflower and Oswald, when we analyse life satisfaction in place of happiness, and when we measure development using GDP per capita in place of the HDI. Indeed, in the World Values Survey, only one other country (Iceland) has a significantly higher level of both life satisfaction and happiness than Australia. Our findings are also consistent with numerous cross-national surveys conducted since the 1940s, which have consistently found that Australians report high levels of wellbeing.
Discussion paper version (with detailed appendix)
Economic Voting and Electoral Behavior: How do Individual, Local and National Factors Affect the Partisan Choice?, Economics and Politics, 2005
What impact do income and other demographic factors have on a voter’s partisan choice? Using post-election surveys of 14,000 voters in 10 Australian elections between 1966 and 2001, I explore the impact that individual, local, and national factors have on voters’ decisions. In these 10 elections, the poor, foreign-born, younger voters, voters born since 1950, men, and those who are unmarried are more likely to be left-wing. Over the past 35 years, the partisan gap between men and women has closed, but the partisan gap has widened on three dimensions: between young and old; between rich and poor; and between native-born and foreign-born. At a neighborhood level, I find that, controlling for a respondent’s own characteristics, and instrumenting for neighborhood characteristics, voters who live in richer neighborhoods are more likely to be right-wing, while those in more ethnically diverse or unequal neighborhoods are more likely to be left-wing. Controlling for incumbency, macroeconomic factors do not seem to affect partisan preferences – Australian voters apparently regard both major parties as equally capable of governing in booms and busts.
Researchers who wish to re-analyse this data are welcome to adapt my Stata do-files, though you will need to obtain the election surveys from the ICPSR or ASSDA (for more details of the surveys used, see the paper's Data Appendix). Two Stata do-files were used in this paper - one which sets up the datasets, and another which runs the regressions.
analyze financial market data in order to produce an
ex-ante assessment of the cost of war with Iraq. The novel feature of our
analysis derives from the existence of a market for "Saddam Securities,"
a new option traded on an online betting exchange that pays only if Saddam
Hussein is ousted. We find that war raises oil prices by around $10 per barrel, and lowers the value of US equities by about 15
percent. · ·Three Tools for Forecasting Federal
Elections: Lessons from 2001 (with Justin
Wolfers) Australian Journal of Political Science, 2002 ·What is the best way to predict
Australian federal election results? This article analyses three forecasting
tools: opinion polls, economic models, and betting odds. Historically, we ˇ nd that opinion polls taken close to the election are quite
accurate, while economic models provide better medium-run forecasts. The
November 2001 federal election largely follows this pattern, although the
economic models provided more accurate projections than recorded through the
1990s. Against these, we compare betting odds, analysing a rich data source
from one of Australia’s largest bookmakers, Centrebet.
The betting market not only correctly forecast the election outcome, but also
provided very precise estimates of outcomes in a host of individual electorates.
Betting ¸ uctuations present an intriguing
quantitative record of the shifting fortunes of the campaign. Particularly in
marginal seats, the press may have better served its readers by reporting
betting odds than by conducting polls. We conclude that the results of these
three models can help determine how important the events of August and
September 2001 were in deciding the outcome of the election.
Stata dataset and do-file (zipped)
The Second Convict Age:
Explaining the Return of Mass Imprisonment in Australia, Economic Record,
Constructing a new series of incarceration rates from 1860 to 2018, I find that Australia now incarcerates a greater share of the adult population than at any point since the late nineteenth century. Much of this increase has occurred since the mid-1980s. Since 1985, the Australian incarceration rate has risen by 130 percent, and now stands at 0.22 percent of adults (221 prisoners per 100,000 adults). Recalculating Indigenous incarceration rates so that they are comparable over a long time span, I find that incarceration rates for Indigenous Australians have risen dramatically. Fully 2.5 percent of Indigenous adults are incarcerated (2481 prisoners per 100,000 adults), a higher share than among African Americans. The recent increase in the Australian prison population does not seem to be due to crime rates, which have mostly declined over the past generation. Instead, higher reporting rates, stricter policing practices, tougher sentencing laws, and more stringent bail laws appear to be the main drivers of Australia’s growing prison population.
Incarceration Rates for Australia, Canada, England & Wales, New Zealand and
the United States, Australian Economic History Review, 2020
Compiling data from dozens of archival sources, I compile the most extensive series to date of the long-run imprisonment rate for five English-speaking nations: Australia, Canada, England and Wales, New Zealand and the United States. These series are constructed as a share of adults rather than the entire population, and I discuss why the latter can be misleading. In the late-nineteenth century, Australia had the highest incarceration rate of these nations. Today, the United States has the highest rate. With the exception of Canada, incarceration rates have risen markedly since the mid-1980s. These new series are made available in full, to allow other researchers to explore the consequences and causes of incarceration.
The Misaddressed Letter
Experiment (with Gweneth Leigh), Applied
Economics Letters, 2018
We design a new field experiment to test pro-social behaviour: will a household return a letter that has been incorrectly addressed? On average, we find that half of all letters were returned. Return rates do not vary significantly according to the gender, race or ethnicity of the fictitious addressee. However, return rates are higher in more affluent neighbourhoods.
Born on the First of July: An (Un)natural
Experiment in Birth Timing (with Joshua Gans),
Journal of Public Economics, 2009
It is well understood that government policies can distort behavior. 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 cesarean section procedures. This birth timing event represents a considerable opportunity for health researchers to study the impact of planned birthdays and hospital management issues.
Stata do-files (zipped)
Op-Ed, The Australian, 20 June 2006
Do Gun Buybacks Save Lives? Evidence from Panel Data (with Christine Neill), American Law and Economics Review, 2010
In 1997, Australia implemented a gun buyback program that reduced the stock of firearms by around one-fifth (and nearly halved the number of gun-owning households). Using differences across states, we test whether the reduction in firearms availability affected homicide and suicide rates. We find that the buyback led to a drop in the firearm suicide rates of almost 80 per cent, with no significant effect on non-firearm death rates. The effect on firearm homicides is of similar magnitude, but is less precise. The results are robust to a variety of specification checks, and to instrumenting the state-level buyback rate.
Data and Stata code (zipped)
Do Gun Buybacks
Save Lives? Evidence from Time Series Variation (with Christine Neill), Current Issues in
Criminal Justice, 2008
Three recent papers have examined the effect of a national tightening of firearm legislation and gun buy-back in Australia in 1996-1997 on firearm and non-firearm death rates. Despite analysing almost the same data, the three papers reach rather different conclusions. In this article, we highlight key methodological concerns with the papers. We also make some judgments as to the evidence on the effectiveness of the Australian legislation. Drawing strong conclusions from simple time series analysis is not warranted, but to the extent that this evidence points anywhere, it is towards the firearms buy-back reducing gun deaths.
Assimilate as Communities, Not Just as Individuals (with Tim Hatton), Journal of Population Economics, 2011
There is a large econometric literature that examines the economic assimilation of immigrants in the United States and elsewhere. On the whole immigrants are seen as atomistic individuals assimilating in a largely anonymous labour market, a view that runs counter to the spirit of the equally large literature on ethnic groups. Here we argue that immigrants assimilate as communities, not just as individuals. The longer the immigrant community has been established the better adjusted it is to the host society and the more the host society comes to accept that ethnic group. Thus economic outcomes for immigrants should depend not just on their own characteristics, but also on the legacy of past immigration from the same country. In this paper we test this hypothesis using data from a 5 percent sample of the 1980, 1990 and 2000 US censuses. We find that history matters in immigrant assimilation: the stronger is the tradition of immigration from a given source country, the better the economic outcomes for new immigrants from that source.
Stata dataset and do-file (zipped)
Shop: The Case of Obstetrics Conferences (with Joshua Gans and Elena Varganova), Social
Science and Medicine, 2007
We estimate the impact of annual obstetricians and gynecologists’ conferences on births in Australia and the United States. In both countries, the number of births drops by 1 to 4 percent during the days on which these conferences are held. We argue that for this reason professional obstetrics societies should reconsider the timing of their annual conferences to accommodate the lowest natural birth rate in the year.
Did the Death of Australian Inheritance Taxes
Affect Deaths? (with Joshua Gans), Berkeley
Electronic Press: Topics in Economic Analysis & Policy, 2006
In 1979, Australia abolished federal inheritance taxes. Using daily deaths data, we show that approximately 50 deaths were shifted from the week before the abolition to the week after (amounting to over half of those who would have been eligible to pay the tax). Our results imply that over the very short run, the death rate is highly elastic with respect to the inheritance tax rate.
Op-Ed, The Age, 27 June 2006
Toying with Death and Taxes: Some Lessons from
Down Under (with Joshua
Gans), The Economists' Voice, 2006
Economists think many (most?) things are subject to incentives. The evidence from down under suggests that even the timing of death could vary with a repeal of estate taxes.
Bargaining Over Labor: Do Patients have any Power? (with Joshua Gans),
Economic Record, 2012
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.
How much do non-medical factors affect the timing of conceptions, births and deaths? To test this, we estimate the effect of the millennium on conceptions, births and deaths. With a highly flexible empirical specification, we find large and significant increases in conceptions and births, and suggestive evidence of an effect on deaths.
Does the Lunar Cycle Affect Birth
and Deaths? (with Joshua Gans), 2006
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.
Does Child Gender Affect Marital Status?, Journal of Population Economics, 2008
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.
Materialism on the March: From Conspicuous Leisure to Conspicuous Consumption? (with Paul Frijters), Journal of Socio-Economics, 2008
This paper inserts Veblen’s (1898) concepts of conspicuous leisure and conspicuous consumption into a very simple model. Individuals have the choice to either invest their time into working, leading to easily observable levels of consumption, or into conspicuous leisure, whose effect on utility depends on how observable leisure is. We let the visibility of leisure depend positively on the amount of time an individual and her neighbors have lived in the same area. Individuals optimize across conspicuous leisure and conspicuous consumption. If population turnover is high, individuals are made worse off, since the visibility of conspicuous leisure then decreases and the status race must be played out primarily via conspicuous consumption. Analyzing interstate mobility in the US, we find strong support for our hypothesis: a 1 percentage point rise in population turnover increases the average work week of non-migrants by 7 minutes. The negative externality of population turnover on the visibility of conspicuous leisure is an argument for higher mobility taxes.
What Can Economics and Sociology Learn From One Another?, Slides from a plenary presentation to the 2009 Australian Sociological Association conference
Evidence-Based Policy: Summon the Randomistas? Paper delivered to a Productivity Commission Roundtable on ‘Strengthening Evidence-Based Policy in the Australian Federation’, 2009
Socio-Economic Correlates of Body Size Among Australian Adults (with Michael Kortt) HILDA Statistical Report, 2009
· ·What Evidence Should Social Policymakers Use?
Economic Roundup, 2009 ·
How Can We Improve Teacher Quality?, Melbourne Review, 2007
Diversity, Trust and Redistribution, Dialogue
(Journal of the Academy of Social Sciences in Australia), 2006
It is a safe bet that Australia will become more ethnically diverse in the future. How will this affect trust and attitudes towards redistribution?
Political Economy of Tax Reform in Australia, Public
The tax cuts in the 2005 and 2006 budgets will increase Australian inequality by about half a gini point. I speculate about the factors that might have led to such regressive tax cuts being enacted.
Aurora Magazine, July 2006
It is sometimes argued that Australia would better off maximising self-reported happiness than aiming to boost national income. Yet because individuals become habituated to improvements in living standards, happiness is a more useful tool for comparing people in the same society than it is for measuring changes in societal wellbeing over time.
the Grade, Griffith Review, 2006
Education reformers should devote more attention to 'school productivity': making our education dollars go further.
Those who advocate lowering top tax rates are out of step with the views of most Australians. Contrary to figures that are often reported, the income of the average Australian is less than $30,000 per year, which is near the bottom of the 30 percent tax bracket. Instead, we should simplify our tax filing system by allowing most people the option of not filing a return, and reduce effective marginal tax rates at the bottom, where the rates are highest, and the problem of joblessness most acute.
Why the Australian Capital Territory Should Offer Wage Subsidies to Low-Skilled Workers (Op-Ed version, Canberra Times, 9 September 2005)
Australian Financial Review version, 28 May 2005
The Progressive Case for Reforming Australia’s Schools, Progressive Essays, July 2005
In the field of primary and secondary education, progressives in Australia have generally adopted a conservative approach to reform. Yet with troubling new evidence suggesting that literacy and numeracy scores have stagnated or fallen since the 1970s, Australian progressives should be more open to new reforms being favoured by social democrats in Britain and the US: publishing test score results, promoting healthy competition between schools, and finding new ways to attract and keep the best teachers.
The quality of the US teaching profession has declined since the 1960s, and there are enormous disparities in teacher quality between poor and affluent schools. We discuss some solutions to help policymakers tackle the teacher quality crisis.
The Decline of an Institution, Australian Financial Review, 7 March 2005 (Economics Briefing series)
Over the past twenty years, Australia's unionisation rate has halved. Four factors explain the collapse: changes to the laws governing unions, more product market competition, rising inequality, and structural change in the labour market.
Continental Drift, a review essay discussing Alberto Alesina and Edward Glaeser, Fighting Poverty in the US and Europe: A World of Difference. Published in the Australian Financial Review, 3 December 2004
A new book by two Harvard economists sets out to discover why Europe's welfare systems are more generous than America's. They conclude that two factors - voting systems and ethnic diversity - explain most of the gap. How does Australia fit into the argument, and what does this say about the future of welfare systems in an increasingly diverse society?
Randomised trials are generally considered to be the "gold standard" in policy evaluation, yet remain rare in Australia. This paper outlines why randomised trials are superior to other methods of evaluation. By contrast to most alternatives, randomised trials allow researchers to observe the appropriate counterfactual: what would have happened in the absence of the policy intervention? Six common objections to randomised trials are addressed, and the history of randomized trials is briefly summarised. Such trials have contributed to policy development in four important areas: training for unemployed workers, education, neighborhood effects, and the treatment of drug offenders. The paper concludes with a call to Australian policymakers to engage in more randomised trials, and suggestions of several areas in which trials could be usefully employed.
This paper was the subject of an online discussion conducted by the Australian Public Policy Research Network.
2002, the Nobel prize in economics was awarded to a behavioral
economist and an experimental economist. We discuss how this emerging body of
work has affected economics, and led to new insights about saving patterns,
gym-going, and smoking. · ·Fair Play from Foul, AQ:
Journal of Contemporary Analysis, May/June 2002 ·How can we weed out player corruption, referee bias and
drug-taking from our favorite sports? Three recent
papers in the economics literature suggest some answers. · ·A radical US social experiment is showing how your neighborhood
affects your life chances. The idea of assisting poor people to move to better neighborhoods may point the way to tackling geographically
concentrated poverty in Australia. · ·Globalisation and Deglobalisation, AQ:
Journal of Contemporary Analysis, January/February 2001
Looks at the extent of global integration in the late-19th and early 20th century, and the isolationism of the inter-war period, and considers what implications this might have for today's globalisers.
Discussion of Poot & Sanderson, Changes in Social Security Eligibility and the International Mobility of New Zealand Citizens to Australia, An International Perspective on Immigration and Immigration Policy Conference, ANU, 1 December 2006
Discussion of Skladzien, Strategic Interaction Between Corrupt Governments in a Growth Model, PhD Conference, ANU, 10 November 2006 (received best discussant award)
Discussion of Doiron & Gųrgens, State dependence in youth labor market experiences and the evaluation of policy interventions, Labour Econometrics Workshop, University of South Australia, 11 August 2006
Discussion of Fertig & Kluve, “The Effect of Age at School Entry on Educational Attainment in Germany”, presented at the Social Policy Evaluation Annual Conference, Canberra, 23 February 2005.
Entry on Trends in Social Capital, prepared for Karen Christensen and David Levinson (eds) Encyclopedia of Community: From the Village to the Virtual World, 2003
Reviving Community: What policy-makers can do to build social capital in Britain and America (with Robert Putnam). Renewal. 10(2). 2002
Bowling Along. Australian Policy Online. May 2002
Breaking Down Bureaucratic Barriers: The Next Phase of Digital Government (with Robert D. Atkinson), Progressive Policy Institute, November 2001.
Clear Thinking on the Digital Divide (with Robert D. Atkinson), Progressive Policy Institute, June 2001
Mandatory High Court Retirement System works in Australia, National Law Journal, 6 January 2006
Entry on Associates, prepared for Tony Blackshield, Michael Coper and George Williams (eds), The Oxford Companion to the High Court of Australia, 2001
Entry on Tenure, prepared for Tony Blackshield, Michael Coper and George Williams (eds), The Oxford Companion to the High Court of Australia, 2001
Behind the Bench: Associates in the High Court of Australia, Alternative Law Journal, December 2000
The successful Attorney-General – an oxymoron? Australian Law Journal, February 1999
Drag Kings, Sydney Morning Herald, 24 September 1993
Reinvigorating the Australian Project, Garran Oration, Australian Journal of Public Administration, March 2005
Imagining Australia: Ideas for Our Future . Co-authored with Macgregor Duncan, David Madden and Peter Tynan. Published by Allen and Unwin, Sydney, 2004.
The Rise and Fall of the Third Way, AQ: Journal of Contemporary Analysis, March-April 2003
Thinking Ahead: Strategic Foresight and Government, Australian Journal of Public Administration, June 2003
Trade Liberalisation and the Australian Labor Party, Australian Journal of Politics and History, December 2002
Factions and Fractions: A Case Study of Power Politics in the Australian Labor Party, Australian Journal of Political Science, November 2000
Globalisation and Deglobalisation, AQ: Journal of Contemporary Analysis, January/February 2001
Australian Politics 1983-2003, Let's Go Australia 2004, St Martin's Press, New York
Evidence-Based Criminal Justice Policy: Summon the Randomistas?, Speech to the NSW Bureau of Crime Statistics and Research 40th Anniversary Symposium, 19 February 2009
Constitutional Reform, Then and Now, Speech to ACT Australian Republican Movement dinner, 2 June 2007