Actual versus perceived income

Andrew Leigh is reporting on 1999 research showing that many high income earners wrongly place themselves in lower income deciles and many low income earners place themselves in a higher income decile than is justified by their actual income (also cross-posted at Core Economics).

In the past (p.16) I have used this data to suggest that some people who agree to survey propositions that above-average income earners pay more tax – as 41% of people are in the latest Essential Research survey – may get a nasty shock when they find the taxman raiding their wallets.

While I still think this is likely to be the case, asking people to put themselves into the correct income decile is a big ask. I would expect more general questions such as average, below average, or above average would yield more accurate results. Using data from the 2005 Australian Survey of Social Attitudes and comparing it to 2006 census household family income data I found that accuracy improved but significant discrepancies remained.

(The image is not entirely clear: the three horizontal axis labels are below median <$52,000; median $52,000-$77,999, and above median <$78,000) Continue reading “Actual versus perceived income”

Vertical federal competition

The latest Newspoll survey on federalism sponsored by Griffith University has another small piece of evidence that the Pincus position – the idea that Australian federalism works principally through vertical interaction and competition between the Commonwealth and the states rather than horizontal competition between the states – may have popular support.

A question on features of federalism (there are several in the survey, but the answers to most have not been released) asked whether ‘different levels of government being able to collaborate on solutions to problems’ was desirable, and more than 90% said yes. While respondents may have had in mind better bureaucratic coordination, like the two houses in a bicameral system two levels of government in a federal system may offer different perspectives, interests, experiences and abilities.

The current situation in which Victoria, with extensive experience of a case-mix system of hospital funding, is putting an alternative to Kevin Rudd’s hospital funding plan into the national debate is a good example of how the policy competition that is supposed to be a feature of horizontal competition between states can also work vertically. Continue reading “Vertical federal competition”