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Distributional consequences of commodity price shocks: Australia over a century

journal contribution
posted on 2023-06-08, 19:27 authored by Sambit BhattacharyyaSambit Bhattacharyya, Jeffrey G Williamson
This paper studies the distributional impact of commodity price shocks over the short and the very long run. Using a GARCH model, we find that Australia experienced more volatility than many commodity exporting developing countries over the periods 1865–1940 and 1960–2008. We conduct cointegration tests to assess the commodity price shock inequality nexus. 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 the 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.

History

Publication status

  • Published

File Version

  • Published version

Journal

The Review of Income and Wealth

ISSN

1475-4991

Publisher

Wiley

Issue

2

Volume

62

Page range

223-244

Department affiliated with

  • Economics Publications

Full text available

  • No

Peer reviewed?

  • Yes

Legacy Posted Date

2015-01-09

First Compliant Deposit (FCD) Date

2015-01-08

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