School of Accounting and Commercial Law – Te Kura Kaute, Ture Tauhokohoko: Chair in Public Finance: Working Paper Series

Permanent URI for this collectionhttps://ir.wgtn.ac.nz/handle/123456789/21218

The Chair in Public Finance is located in the school of School of Accounting and Commercial Law. The aims of the Chair in Public Finance are to build up expertise in the area of public finance (broadly defined) and to promote research, debate, policy analysis and advice on public finance matters. For further information about the chair please refer to the Chair in Public Finance website.

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Now showing 1 - 12 of 12

Open Access
Age-Income Profiles in New Zealand: New Estimates Based on Administrative Data
(Te Herenga Waka—Victoria University of Wellington, 2022) Alinaghi, Nazila; Creedy, John; Gemmell, Norman
This paper uses a new longitudinal dataset, containing information about the incomes of New Zealand individuals, to examine the form of cohort age-income profiles. A model of the variation in mean log-earnings with age, allowing for quadratic age and linear time effect, is estimated separately for males and females, along with a range of other demographic groups. An 'overtaking' property, whereby more recent cohorts have higher real income than older cohorts, at comparable ages, are found in all cases. Cubic profiles of the variation in the variance of log-income with age are also estimated. Examples of the projected changing distribution of income with age are given, for various cohorts aged 20 in 2020.
Open Access
Constructing a Longitudinal Database for the Analysis of Individual Incomes in New Zealand
(Te Herenga Waka—Victoria University of Wellington, 2020) Alinaghi, Nazila; Creedy, John; Gemmell, Norman
This paper describes the construction of a unique longitudinal individual-level dataset that allows the dynamics of individual incomes in New Zealand to be examined. The data are obtained from the New Zealand Integrated Data Infrastructure, and cover approximately 393,874 taxpayers, for whom a range of information including, but not limited to, taxable income, gender, ethnicity, education level and location have been compiled. The availability of suitable data has previously been a constraint on income dynamics research. The present data construction exercise allows a more extensive analysis of individual income inequality and mobility than has previously been possible.
Open Access
Designing Direct Tax Reforms: Alternative Approaches
(Te Herenga Waka—Victoria University of Wellington, 2020) Alinaghi, Nazila; Creedy, John; Gemmell, Norman
How high should the top personal income tax rate be? Is there an `optimal' structure of tax rates and thresholds? Despite numerous value judgements being required to answer such questions, this paper suggests that 'rational policy analysis' principles can nevertheless be applied to support policy advice on these and other direct tax design questions. It is argued that the economic models thought suitable as the basis for tax analysis vary according to the precise ways in which the policy question is formulated; the underlying behavioural responses to taxation expected across the taxpaying population; the precise definitions of key variables such as income inequality; and the specification of policy objectives such as redistribution, revenue-raising or tax efficiency.
Open Access
Differential Income Growth of Individuals in New Zealand: Evidence from Administrative Data
(Te Herenga Waka—Victoria University of Wellington, 2022) Alinaghi, Nazila; Creedy, John; Gemmell, Norman
This paper uses administrative, longitudinal data on the New Zealand taxpayer population to examine the nature and extent of income mobility by individuals. It uses recently developed illustrative devices for mobility measures based on individuals' relative income growth over time, for periods of 1 to 15 years, during 2002 to 2017. Results highlight consistently higher (lower) relative income growth for those with initially lower (higher) incomes, reflecting strong 'regression to the mean' processes.
Open Access
Do Couples Bunch More? Evidence from Partnered and Single Taxpayers in New Zealand
(Te Herenga Waka—Victoria University of Wellington, 2020) Alinaghi, Nazila; Creedy, John; Gemmell, Norman
Recent papers hypothesise that estimates of the elasticity of taxable income (ETI) for individuals may be biased where those individuals are taxed separately but are part of a couple family. This paper investigates that issue by applying the 'bunching at tax kinks' approach to estimate separate ETIs for partnered and single individuals. It shows that there are opportunities for, and constraints on, bunching specific to partnered individuals. Using administrative taxable income data for the New Zealand taxpayer population over the period, 2000 to 2017, individual taxpayers are matched to their partners using population census data. Results provide strong support for the hypotheses that ETIs are larger for individuals in couples than for single individuals, and for couples where both partners are located in the same income tax bracket. Self-employed individuals in couple families reveal especially large ETIs.
Open Access
Income Inequality and the Accounting Period in New Zealand: Evidence from Administrative Data
(Te Herenga Waka—Victoria University of Wellington, 2022) Alinaghi, Nazila; Creedy, John; Gemmell, Norman
This paper examines the effect on taxable income inequality among New Zealand individuals of extending the accounting period beyond a single year. Typically, inequality comparisons are based on a single year accounting period and involve cross-sectional measures, ignoring the role of income dynamics. The paper uses a specially constructed dataset of the New Zealand taxpayer population since 2000. Results are reported for the population as a whole and for groups distinguished by age, gender, ethnicity and educational qualifications.
Open Access
Inter-Decile Income Movements of Individuals in New Zealand: Evidence from Administrative Data
(Te Herenga Waka—Victoria University of Wellington, 2022) Alinaghi, Nazila; Creedy, John; Gemmell, Norman
This paper provides an empirical description of the income mobility of individual incomes in New Zealand over the period 2002 to 2017, using information from transition matrices. These capture movements of individual taxpayers between deciles of the income distribution over periods ranging from one to fifteen years. Transitions for sample decompositions by age, gender, ethnicity and education level are also explored. Though 1-year transitions indicate considerable inertia or stability, a relatively high degree of movement between deciles is observed across most of the distribution over longer periods. Different age, gender, ethnicity and educational qualification decompositions reveal remarkably similar patterns of inter-decile movement.
Open Access
A Longitudinal Database for the Analysis of Family Incomes in New Zealand
(Te Herenga Waka—Victoria University of Wellington, 2020) Alinaghi, Nazila; Creedy, John; Gemmell, Norman
This paper describes the construction of a unique longitudinal family-level dataset that allows the dynamics of family incomes in New Zealand to be examined over the period, 2000 to 2017. The data are obtained from the New Zealand Integrated Data Infrastructure, requiring a complex linking exercise to be carried out. The dataset provides a basic resource for economic analyses of income inequality in which substantial attention is paid to the accounting period over which income is measured, and the nature of income changes over calendar time for different date-of-birth cohorts.
Open Access
Measuring Positional Changes within the New Zealand Income Distribution: Evidence from Administrative Data
(Te Herenga Waka—Victoria University of Wellington, 2022) Alinaghi, Nazila; Creedy, John; Gemmell, Norman
This paper use administrative, longitudinal data on the New Zealand taxpayer population to examine the nature and extent of positional changes within the income distribution by individuals. It uses recently developed devices for illustrating re-ranking over time, for periods of 1 to 15 years, during 2002 to 2017. The results, for a range of population groups, highlight the fact that there is a high degree of re-ranking by individuals within the income distribution. After 15 years, re-ranking of individuals' incomes represent around 30 to 45 per cent of the maximum re-ranking possible.
Open Access
Meta-Analysis and Publication Bias: How Well Does the Fat-Pet-Peese Procedure Work?
(Te Herenga Waka—Victoria University of Wellington, 2017) Alinaghi, Nazila; Reed, W. Robert
This paper studies the performance of the FAT-PET-PEESE (FPP) procedure, a commonly employed approach for addressing publication bias in the economics and business meta-analysis literature. The FPP procedure is generally used for three purposes: (i) to test whether a sample of estimates suffers from publication bias, (ii) to test whether the estimates indicate that the effect of interest is statistically different from zero, and (iii) to obtain an estimate of the mean true effect. Our findings indicate that the FPP procedure performs well in the basic but unrealistic environment of “fixed effects,” where all estimates are assumed to derive from a single population value and sampling error is the only reason for why studies produce different estimates. However, when we study its performance in more realistic data environments, where there is heterogeneity in the population effects across and within studies, the FPP procedure becomes unreliable for the first two purposes, and is less efficient than other estimators when estimating overall mean effect. Further, hypothesis tests about the mean true effect are frequently unreliable. We corroborate our findings by recreating the simulation framework of Stanley and Doucouliagos (2017) and repeat our tests using their framework.
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The Redistributive Effects of a Minimum Wage Increase in New Zealand. A Microsimulation Analysis
(Te Herenga Waka—Victoria University of Wellington, 2019) Alinaghi, Nazila; Creedy, John; Gemmell, Norman
This paper examines the potential effects on inequality and poverty of a minimum wage increase, based on a microsimulation model which allows for labour supply responses. It then compares these outcomes with an alternative, commonly used policy of raising government welfare benefits, similarly aimed at poverty or inequality reduction. Results suggested that, due to the composition of household incomes, a policy of increasing the minimum wage appears to have a relatively small effect on the inequality of income per adult equivalent person, using several inequality indices. The minimum wage policy is not particularly well targeted at its objective, largely due to many low-wage earners being secondary earners in higher-income households, while many low-income households have no wage earners at all. However, an ‘equivalent’ policy of raising welfare benefits does not clearly demonstrate ‘target superiority’. Results suggest that while raising benefits has a greater ability to reduce most poverty measures examined, substantially smaller inequality reductions are found to be associated with benefit increases compared to a minimum wage increase. Thus benefit increases represent a relatively effective strategy for poverty reduction, mainly by targeting sole parents, but (like minimum wages) are also relatively ineffective if inequality reduction is the objective.
Open Access
Taxes and Economic Growth in OECD Countries: A Meta-Regression Analysis
(Te Herenga Waka—Victoria University of Wellington, 2017) Alinaghi, Nazila; Reed, W. Robert
This paper uses meta-analysis to evaluate the results of 42 studies and 641 individual estimates of the effect of taxes on economic growth in OECD countries. Our analysis addresses a number of difficult coding issues such as: implications of the government budget constraint for interpretations of tax effects; units of measurement for economic growth rates and tax rates; implications of equation specifications that measure short-run, medium-run, and long-run effects; length of time period (annual data versus multi-year periods); and other factors. Our main findings are: Estimates in the literature are characterized by significant (negative) publication bias. Controlling for publication bias, we find that increases in unproductive expenditures funded by distortionary taxes and/or deficits have a significant, negative effect on growth; while increases in non-distortionary taxes to fund productive expenditures and/or government surpluses have a significant, positive effect. The estimated differences in these policies indicate that there is scope for tax policy to have a meaningful impact on economic growth. Finally, we find weak evidence that taxes on labour are more growth retarding than other types of taxes, while the evidence regarding other types of taxes is mixed.

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