Inflation expectations, interest rates and arbitrary income transfers

Unexpected inflation, disinflation or deflation cause arbitrary income transfers between an economy's borrowers and lenders. This redistribution results from distorted real interest rates that are too high when price level changes are over-predicted and too low when they are under-predicted. This article shows that in Australia's case, inflation expectations were mostly biased upwards throughout the 1990s, according to the Melbourne Institute of Applied Economic and Social Research series and to a new derived series based on bond yields, implying that real interest rates were too high over this time. In turn, this caused substantial arbitrary income transfers from debtors to creditors, estimated to have averaged up to 3 per cent of gross domestic product over the period.

Comments on "Exact solution for horizontal redistribution by general similarity"

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Scope for further analytical solutions for constant flux infiltration into a semi-infinite soil profile or redistribution in a finite soil profile

[1] We attempt to generate new solutions for the moisture content form of the one-dimensional Richards' [1931] equation using the Lisle [1992] equivalence mapping. This mapping is used as no more general set of transformations exists for mapping the one-dimensional Richards' equation into itself. Starting from a given solution, the mapping has the potential to generate an infinite number of new solutions for a series of nonlinear diffusivity and hydraulic conductivity functions. We first seek new analytical solutions satisfying Richards' equation subject to a constant flux surface boundary condition for a semi-infinite dry soil, starting with the Burgers model. The first iteration produces an existing solution, while subsequent iterations are shown to endlessly reproduce this same solution. Next, we briefly consider the problem of redistribution in a finite-length soil. In this case, Lisle's equivalence mapping is generalized to account for arbitrary initial conditions. As was the case for infiltration, however, it is found that new analytical solutions are not generated using the equivalence mapping, although existing solutions are recovered.

Property crime and income generation by heroin users

This paper provides a detailed analysis of patterns of income generation among 202 active heroin users in South West Sydney. We explore both sources of income and the relative contribution of different types of income generating activities, including drug sales and related activities, property crime, prostitution, legitimate income and avoided expenditures. Despite claims that heroin use leads inevitably to property crime, drug market activities accounted for a greater proportion of drug user income in this sample. Results indicate that law enforcement crackdowns that reduce opportunities for generating income from the drug market may increase property crime by heroin users.

Rental housing provision for lower income older Australians

The number of people aged 65 years or over in low-income rental households will more than double by 2026. The social housing system, at its current growth rate, will not meet their needs. This research involved demographic projections of older renters, examined their housing preferences, and analysed the supply capacity of the public and private rental sectors to respond.

Estimating Income Inequality in China Using Grouped Data and the Generalized Beta Distribution

There are two main types of data sources of income distributions in China: household survey data and grouped data. Household survey data are typically available for isolated years and individual provinces. In comparison, aggregate or grouped data are typically available more frequently and usually have national coverage. In principle, grouped data allow investigation of the change of inequality over longer, continuous periods of time, and the identification of patterns of inequality across broader regions. Nevertheless, a major limitation of grouped data is that only mean (average) income and income shares of quintile or decile groups of the population are reported. Directly using grouped data reported in this format is equivalent to assuming that all individuals in a quintile or decile group have the same income. This potentially distorts the estimate of inequality within each region. The aim of this paper is to apply an improved econometric method designed to use grouped data to study income inequality in China. A generalized beta distribution is employed to model income inequality in China at various levels and periods of time. The generalized beta distribution is more general and flexible than the lognormal distribution that has been used in past research, and also relaxes the assumption of a uniform distribution of income within quintile and decile groups of populations. The paper studies the nature and extent of inequality in rural and urban China over the period 1978 to 2002. Income inequality in the whole of China is then modeled using a mixture of province-specific distributions. The estimated results are used to study the trends in national inequality, and to discuss the empirical findings in the light of economic reforms, regional policies, and globalization of the Chinese economy.

Effect of gender on ownership and income in veterinary practice

Objective To estimate the effect of gender on ownership and income in veterinary practice in Australia. Methods Questionnaire completed by private veterinary practitioners, and analysed using the SAS System for Windows 7.0. Results More than three-quarters (78%) of male but 36% of female private practitioners were partial or sole owners of practices. The median annual income for all male practitioners working more than 40 hours/week was $70K, but that for females was $43K. These disparities existed in both city and country practices, and in the case of income it increased with increasing time in the workforce. Male practice owners also reported higher incomes than female owners. Conclusions Female veterinary practitioners are less likely to own practices, and more likely to earn low incomes than males. These differentials do not appear to be due to location, hours worked or years since graduation or, in the case of income, to whether they are owners or employees. The evidence points to a lower interest by women than men in the business aspects of veterinary practice.

Reconciling value estimates from the discounted cash flow model and the residual income model

This paper examines why practitioners and researchers get different estimates of equity value when they use a discounted cash flow (CF) model versus a residual income (RI) model. Both models are derived from the same underlying assumption -- that price is the present value of expected future net dividends discounted at the cost of equity capital -- but in practice and in research they frequently yield different estimates. We argue that the research literature devoted to comparing the accuracy of these two models is misguided; properly implemented, both models yield identical valuations for all firms in all years. We identify how prior research has applied inconsistent assumptions to the two models and show how these seemingly small errors cause surprisingly large differences in the value estimates. [ABSTRACT FROM AUTHOR]

Reconciling Globalisation and Technological Change: Growing Income Inequalities and Remedial Policies

From the mid-1970s through the 1980s and into the 1990s, wage inequality and skill differentials in earnings and employment increased sharply in OECD countries. After 1973 and especially in the 1980s, the US experienced a dismal real wage performance for the less skilled. Among the factors singled out by economists as possible major contributors to this development are economic globalisation processes and skill-biased technological change. Although these are most commonly considered as independent influences, after critically outlining views about these factors, this article argues that strong interdependence exists between them. The article then examines potential policy responses to this growing inequality.

Saving, productivity and national income: a discrete-time geometric framework

This paper proposes an alternative geometric framework for analysing the inter-relationship between domestic saving, productivity and income determination in discrete time. The framework provides a means of understanding how low saving economies like the United States sustained high growth rates in the 1990s whereas high saving Japan did not. It also illustrates how the causality between saving and economic activity runs both ways and that discrete changes in national output and income depend on both current and previous accumulation behaviour. The open economy analogue reveals how international capital movements can create external account imbalances that enhance income growth for both borrower and lender economies. (C) 2002 Elsevier Science B.V. All rights reserved.