Distributional Impact of Commodity Price Shocks: Australia Over a Century

35 Pages Posted: 8 Aug 2013

See all articles by Sambit Bhattacharyya

Sambit Bhattacharyya

Australian National University

Jeffrey G. Williamson

Harvard University - Department of Economics, Laird Bell Professor of Economics, Emeritus; Honorary Fellow, University of Wisconsin - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Date Written: August 2013

Abstract

This paper explores the distributional impact of commodity price shocks over the both the short and very long run. Using a GARCH model, we find that Australia experienced more volatility than many commodity exporting poor countries between 1865 and 2007. A single equation error correction model suggests that commodity price shocks increase the income share of the top 1, 0.05, and 0.01 percent in the short run. The very top end of the income distribution benefits from commodity booms disproportionately more than the rest of society. The short run effect is mainly driven by wool and mining and not agricultural commodities. A sustained increase in the price of renewables (wool) reduces inequality whereas the same for non-renewable resources (minerals) increases inequality. We expect that the initial distribution of land and mineral resources explains the asymmetric result.

Keywords: Australia, commodity exporters, commodity price shocks, income inequality

JEL Classification: F14, F43, N17, O13

Suggested Citation

Bhattacharyya, Sambit and Williamson, Jeffrey G., Distributional Impact of Commodity Price Shocks: Australia Over a Century (August 2013). CEPR Discussion Paper No. DP9582, Available at SSRN: https://ssrn.com/abstract=2307405

Sambit Bhattacharyya (Contact Author)

Australian National University ( email )

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Jeffrey G. Williamson

Harvard University - Department of Economics, Laird Bell Professor of Economics, Emeritus ( email )

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Honorary Fellow, University of Wisconsin - Department of Economics

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National Bureau of Economic Research (NBER)

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