Job Market Paper

On the Joint Optimal Design of Taxes and Child Benefits

Author: Darapheak Tin

Progressive income tax and means-tested child benefit systems are designed to support low-income families; however, their interaction generates high and non-linear effective marginal tax rates (EMTRs), which create substantial work disincentives for recipients, especially low-income mothers. I document this equity-efficiency trade-off using Australian household survey data (HILDA), explore how tax and child benefit systems should be designed to maximize (ex-ante) welfare, and examine their macroeconomic and distributional implications. To this end, I develop a dynamic general equilibrium model of overlapping generations, calibrated to Australia (2012–2018), featuring rich household heterogeneity in family structure, female human capital, uninsurable earnings risks, and the age and number of children. I find that optimal tax reform entails reducing tax progressivity, shifting tax burdens from high- to low-income brackets to incentivize longer work hours. This scheme produces a modest welfare gain but disadvantages some low-education parents, thereby undermining the objectives of child benefit programs. Read more

Paper Presentations to Date:

  • RSE Macroeconomics Seminar 2024 (Research School of Economics, ANU)
  • Joint Workshop by Australasian Macroeconomics Society (WAMS) and Laboratory for Aggregate Economics and Finance (LAEF)2024 (scheduled)

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Working Papers

Authors: Darapheak Tin and Chung Tran
Status: Ongoing

Should government transfers to families with children be means-tested? We revisit this question from the unique Australian policy context, where average means-tested child benefits comprise up to 40% of the gross total income of low-income households, coinciding with the distinct M-shaped life cycle profile of labor supply for Australian mothers (Household survey data, HILDA 2001-2020). Motivated by these empirical facts, we explore the aggregate and distributive implications of means-testing and alternative child benefit designs quantitatively through a dynamic general equilibrium overlapping generations model of single and married households with children. Our simulation results demonstrate the significant adverse effects of means-testing on work incentives and human capital development among mothers. Read more

Paper Presentations to Date:

  • American Economic Association (AEA) Annual Meeting 2025 (Poster Session) (San Francisco, CA - scheduled)
  • Labour Econometrics Workshop (LEW) 2024 (University of Queensland)
  • Australian Conference of Economists (ACE) 2024 (University of Adelaide)
  • Society for Computational Economics 30th International Conference on Computing in Economics and Finance (CEF) 2024 (Nanyang Technological Institute)
  • 37th PhD Conference in Economics and Business 2023 (University of Melbourne)
  • Western Economics Association International (WEAI) 2023 Conference (University of Melbourne)
  • 21st Society for the Advancement of Economic Theory (SAET) Conference (Research School of Economics, ANU)
  • PhD Workshop 2022 (Research School of Economics, ANU)
  • RSE Macroeconomics Seminar Series 2022 (Research School of Economics, ANU)

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Sustained Growth and Income Dynamics in Australia

Authors: Darapheak Tin, Chung Tran, and Nabeeh Zakariyya
Status: Ongoing

This paper examines the evolution of earnings distribution over three decades of uninterrupted economic growth in Australia from 1991 to 2020. Using a 10% sample of taxpayer records, we document key statistics for earnings inequality, dynamics, and mobility. Our results reveal moderate upward mobility, particularly among younger workers. However, we also find an upward trend in earnings inequality, driven mainly by growth at the top of the income distribution, with men experiencing higher levels of inequality than women. Additionally, idiosyncratic earnings risk—measured through dispersion and skewness—remained persistent throughout this period. These findings enhance understanding of income inequality dynamics, highlighting steady mobility over the life cycle and enduring top-end inequality despite stable economic conditions.

Publications

“Lifecycle Earnings Risk and Insurance: New Evidence from Australia”

Authors: Darapheak Tin and Chung Tran
Published: Economic Record, 2023.

This paper studies the nature of earnings dynamics in Australia, using the Household, Income and Labour Dynamics in Australia (HILDA) Survey 2001–2020. Our results indicate that the distribution of earnings shocks displays negative skewness and excess kurtosis, deviating from the conventional linearity and normality assumptions. Wage changes are strongly associated with earnings changes and account more for the dispersion of earnings shocks; meanwhile, the contribution of hour changes is largely absent in upward movement and relatively small in downward movement of earnings changes. Read more

Paper Presentations to Date:

  • Australian Treasury 2022
  • Tax and Transfer Policy Institute (TTPI) Seminar Series 2022 (Crawford School of Public Policy, ANU)
  • 31st Australian Labour Market Research (ALMR) Workshop 2022 (Research School of Social Sciences, ANU)
  • Workshop of the Australasian Macroeconomics Society (WAMS) 2021 (Virtual)
  • A-Life Conference 2021 (Crawford School of Public Policy, ANU)
  • RSE PhD Workshop 2021 (Virtual, ANU)
  • RSE Macro Seminar series 2020 (Virtual, ANU)

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